LG Household & Health Care Q3 Operating Profit 342.3 Billion KRW, Up 4.5% YoY

[Asia Economy Reporter Seungjin Lee] LG Household & Health Care has recorded its highest cumulative performance ever with cumulative sales of 6.0684 trillion KRW and operating profit of 1.0486 trillion KRW for the first three quarters of 2021.

LG Household & Health Care announced on the 26th that its sales for the third quarter of this year were 2.0103 trillion KRW, down 2.9% from the same period last year, while operating profit increased by 4.5% to 342.3 billion KRW.

LG Household & Health Care explained that the worsening business environment was inevitable due to various adverse factors such as the spread of the COVID-19 Delta variant, global supply chain shocks, and rising prices of major raw materials. Although sales decreased compared to the same period last year due to some lost sales opportunities caused by intensified export-import logistics chaos ahead of large-scale global shopping events in the fourth quarter such as China’s Singles’ Day and the U.S. Black Friday, profitability improved through an increased proportion of luxury cosmetics and premium product lines. Operating profit has increased for 66 consecutive quarters compared to the same period last year, except for one quarter since the first quarter of 2005.

Cumulative sales for the first three quarters increased by 5.5% year-on-year to 6.0684 trillion KRW, and operating profit rose by 8.7% to 1.0486 trillion KRW. Both sales and operating profit set new all-time cumulative records. The total cosmetics sales for the first three quarters, combining beauty and daily beauty, grew by 7.7% year-on-year to 4.2878 trillion KRW, and operating profit increased by 14.4% to 841.4 billion KRW.

Improved Profitability in Cosmetics Business Due to Increased Sales of High-End Products

Cosmetics business sales for the third quarter decreased by 10.2% year-on-year to 1.0267 trillion KRW, while operating profit increased by 9.0% to 215.4 billion KRW.

The cosmetics business, which has the largest overseas business proportion, suffered the greatest lost sales opportunities due to the global logistics chaos, but profitability improved as the share of high-end cosmetics increased.

Despite the challenging business environment in the short term, LG Household & Health Care explained that it focused on enhancing brand loyalty by providing freshness to consumers through differentiated concepts by continuing new product launches within high-end brands and various collaborative activities.

‘Whoo’ launched the ‘Bichup Ja Saeng Essence’ with upgraded efficacy and ingredients and presented its 12th special edition through collaboration with a global artist. ‘belif’ and the color cosmetics brand ‘VDL’ released a vegan makeup line that aligns with value consumption and eco-friendly trends, which are important to the MZ generation (Millennials + Generation Z), through collaboration.

Cumulative sales for the first three quarters reached 3.3011 trillion KRW, and operating profit was 688.8 billion KRW, up 5.3% and 15.3% respectively compared to the same period last year.

LG Household & Health Care Whoo Bicheop Ja Saeng Essence Special Edition

Household Goods Performance Slightly Declines Due to Raw Material Price Increases

The HDP (household goods) business recorded third-quarter sales of 540 billion KRW, up 6.1% year-on-year, and operating profit of 63.6 billion KRW, down 4.7%.

Despite difficulties in improving profitability due to the base effect from the surge in hygiene product demand last year and steep increases in raw material prices, sales growth was achieved thanks to strong performances from major brands such as ‘Himalayan Pink Salt,’ ‘Physiogel,’ and ‘Jayeonpong.’

The daily beauty business, which drives growth in the HDP business, continued to diversify and differentiate its portfolio by nurturing existing brands and acquiring new ones. Following the premium British toothpaste brand ‘U Smile’ with a loyal fan base, it acquired the vegan fashion haircare brand ‘Arctic Fox,’ which has been gaining attention from the U.S. MZ generation since the end of August, strengthening its premium brand lineup both domestically and internationally.

Cumulative sales for the first three quarters increased by 7.4% year-on-year to 1.5569 trillion KRW, while operating profit decreased by 3.4% to 188.6 billion KRW.

Beverage Business Maintains Solid Performance

The Refreshment (beverage) business posted third-quarter sales of 443.7 billion KRW, up 6.1% year-on-year, and operating profit of 63.2 billion KRW, up 0.1%.

Although sales grew due to strong performances of major brands, operating profit remained at the same level as the previous year due to raw material price pressures continuing since the first half. Responding to the growing consumer trend toward health, major brands such as Coca-Cola, Sprite, and Monster Energy strengthened their low-sugar and low-calorie product lineups.

In particular, ‘Coca-Cola Zero’ led sales growth with a 53% increase compared to the same period last year. The strengthened social distancing measures from July accelerated changes in consumer purchasing patterns, boosting sales growth in beverage consumption channels targeting delivery companies as well as online and convenience stores.

Cumulative sales for the first three quarters grew by 3.8% year-on-year to 1.2105 trillion KRW, while operating profit slightly decreased by 0.4% to 171.2 billion KRW.