Value-Up Disclosure for Enhancing Corporate Value and Increasing Shareholder Value
Targeting Debt Ratio Below 100% and Shareholder Return Rate Above 30%
Lotte Chilsung Beverage has unveiled its 'Value-Up' plan to enhance corporate value. Lotte Chilsung aims to increase its sales by more than 70% within five years to expand to the 5 trillion KRW level and raise the shareholder return ratio to over 30% on a consolidated basis.
"Improving profitability to become a global leading company"
On the 16th, Lotte Chilsung Beverage announced through a public disclosure its 'Corporate Value Enhancement Plan' to raise sales to 5.5 trillion KRW by 2028. In addition to sales growth targets, it set key goals including a return on equity (ROE) of 10-15%, a debt ratio below 100%, and a shareholder return ratio of over 30% on a consolidated basis.
Lotte Chilsung plans to first increase its sales by more than 2 trillion KRW within five years to grow its scale. Last year, Lotte Chilsung posted consolidated sales of 3.2247 trillion KRW, operating profit of 210.7 billion KRW, and net profit of 166.5 billion KRW. This year, based on the first half, it recorded sales of 2.0361 trillion KRW, operating profit of 97 billion KRW, and net profit of 37.2 billion KRW, indicating that sales are expected to grow compared to last year.
Furthermore, through profitability improvement, the company aims to achieve a global leading level of ROE and present growth momentum to improve the price-to-book ratio (PBR). Lotte Chilsung's ROE last year was 11.3%, which is lower than the average of comparable companies at 2.9%. ROE is a representative profitability indicator showing how much a company earns using its equity over one year and is used to evaluate management efficiency. Therefore, a low ROE means that net profit is small relative to equity, indicating poor operational efficiency.
The company also plans to reduce its high debt ratio, which is lower than the average of comparable companies. Lotte Chilsung's debt ratio has steadily increased over the past three years, from 148.9% in 2021 to 161.7% in 2022, and 177.0% last year. This is higher than the comparable companies' average of 115.5% last year. Starting from 169% this year, Lotte Chilsung plans to gradually lower the debt ratio to achieve its target of 100% by 2028, thereby strengthening financial soundness.
Expansion of Zero Sugar Beverage and Alcohol Business
To achieve its goals, Lotte Chilsung also presented growth strategies and operational optimization plans. First, in the beverage business, it will expand its no-sugar business. Having officially entered the zero-sugar beverage market in 2021 with the launch of 'Chilsung Cider Zero' and 'Pepsi Cola Zero,' Lotte Chilsung expanded its zero lineup last year with products like 'Milkis Zero' and is actively introducing various new products this year such as 'Gatorade Zero' to seize market leadership. Additionally, it plans to increase its healthy pleasure portfolio, including plant-based milk, protein, and probiotics.
In the alcohol business, it aims to strengthen competitiveness in the soju and beer markets. Lotte Chilsung's zero-sugar soju 'Saero' has become a new growth engine for Lotte Liquor, surpassing 400 million cumulative sales bottles just 22 months after its launch in July. Lotte Chilsung is expected to expand its influence in the relatively weaker alcohol market compared to beverages by expanding the lineup of the newly launched beer brand 'Crush' last year along with Saero. The company also plans to actively respond to new trends such as distilled spirits, RTD (ready-to-drink), and non-alcoholic beverages beyond soju and beer.
Along with growth strategies, operational optimization plans were also disclosed. Since 2018, Lotte Chilsung has been implementing a ZBB (Zero-based budgeting) strategy focused on improving business models and cost efficiency. It plans to strengthen this strategy by readjusting production lines through factory consolidation and introducing automation centers at logistics hubs. Lotte Chilsung expects ZBB achievements to increase from about 43.1 billion KRW last year to 59.4 billion KRW this year.
Moreover, it announced ESG-related plans concerning sustainability. To achieve carbon neutrality, it will continuously implement RE100 (100% renewable energy) and reduce plastic usage through lightweighting, label-free packaging, and recycling. It will also implement a strengthened shareholder return policy, raising the shareholder return ratio from 21% last year to 30% by 2028 and changing the standard from separate to consolidated basis as its global proportion expands. Based on these shareholder-friendly policies, Lotte Chilsung aims to enhance dividend predictability for investors and restore market trust.
A Lotte Chilsung Beverage official stated, "This disclosure was made to include mid- to long-term goals as part of enhancing corporate value and shareholder-friendly management," adding, "We will continue to actively promote IR activation and capital market development through trustworthy communication."
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