Woongjin Coway IR Presentation Materials...at sale yr1 yr2 yr3 yr4 Cash flow Cash inflow...

0

March 2007

WoongjinWoongjin CowayCoway

IR Presentation MaterialsIR Presentation Materials

WOONGJIN COWAY CO., LTD. (021240)

1

This presentation contains historical information of the Company

which should not be regarded as an indication of future

performance or results. This presentation also contains forward-

looking statements that are, by their 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 result of a number of factors beyond our control.

DisclaimerDisclaimer

2

IndexIndex

Business OverviewBusiness OverviewBusiness Overview

Financial ReportsFinancial ReportsFinancial Reports

Company OverviewCompanyCompany OverviewOverview

Investment HighlightsInvestment HighlightsInvestment Highlights

3

Business OverviewBusiness Overview

Financial ReportsFinancial Reports

Company OverviewCompany Overview

Investment HighlightsInvestment HighlightsInvestment Highlights

4

Key investment highlights

Robust demand for well-being living productsRobust demand for well-being living products

Strong cash flow generation from rental businessStrong cash flow generation from rental business

Solid sales and maintenance CODY networkSolid sales and maintenance CODY network

Management policy in enhancing shareholders’ valueManagement policy in enhancing shareholders’ value

Ongoing revenue and profit increasing based on broad

and solid customer base

Ongoing revenue and profit increasing based on broad

and solid customer base

Strong brand power with dominant position Strong brand power with dominant position

5



Company OverviewCompanyCompany OverviewOverview

Investment HighlightsInvestment Highlights

6

2004

1994

2005

1990

1998

2001

First air cleaner

production and

sales

First air cleaner

production and

sales

2000

Listed on

KRXListed on

KRX

Started bidet

rental serviceStarted bidet

rental service

Launched

system

kitchen brand

Launched

system

kitchen brand

Woongjin Coway is an integrated product and rental service provider focusing on high-end

health and environmental products

Entered

water purifier

business

Entered

water purifier

business

Launched

water purifier

rental service

Launched

water purifier

rental service

Started air

cleaner

rental service

Started air

cleaner

rental service

Started food

waste processor

rental service

Started food

waste processor

rental service

Our history

Merged with Woongjin

Coway DevelopmentMerged with Woongjin

Coway Development

1989

EstablishmentEstablishment

7

SubsidiariesSubsidiaries

Others

32.8%

Foreign investors

28.6%

Other related

parties

3.6%

Direct family

members

2.6%

Woongjin

ThinkBig

5.2%

Seok Keum Yoon

27.2%

* No. of outstanding shares: 74,375,593

Current ownership structure and subsidiaries

Major shareholdersMajor shareholdersCurrent ownership Current ownership

28.6%

3.6%

2.6%

5.2%

27.2%

Stake %

Direct family members

Foreign investors

Other related parties

Woongjin ThinkBig

Seok Keum Yoon

Shareholders

Solar energy

business80.1%Woongjin Energy Co.,Ltd

Malaysian sales70.0%Woongjin Coway

(M)SDN.,BHD.

Chinese sales

Japanese sales

Thailand sales

Description

91.9%

50.0%

99.9%

Stake %

Woongjin Ho-wi Home

appliance Co., Ltd

.

Woongjin Japan

Woongjin Coway

(Thailand)Co.,Ltd

Company Name

[As of Dec. 31, 2006]

[As of March. 2, 2007]

8

Business OverviewBusiness OverviewBusiness Overview




9

Demand of well-being living products is robust with significant room for growth

Woongjin Coway’s products Woongjin Coway’s products

* Source: National Statistics Office, Korean Water Purifier Producers Commission, Japanese industry press

and Gallup research(1H’06)

Product Market ShareKorean

Penetration

Saturation

Rate(E)

Market

Competition

Water purifier

52.6% 25% 55%~60%

Air purifier

36.0% 9.5%

Japan

Bidet

44.1% 10%

Coway : 52.6%

Company C: 8.3%

Company A:6.2%

Coway : 36.0%

Company C: 12.4%

Company S:9.6%

Coway : 44.1%

Company N: 11.7%

Company D: 9.2%

50%~60%

45%~50%

10

Woongjin Coway enjoys a dominant market position due to unparalleled brand recognition

*Source: Gallup research as of Dec. 2005

No.1 brand recognition in KoreaNo.1 brand recognition in Korea

Top position as a health and environment companyTop position as a health and environment company

90.5%Bidet

62.7%Air purifier

94.3%Water purifier

Top of mind brandProduct

Company PWJ Coway Company S Company L Company C

13.7%

29.9%

19.2%

36.2%

42.4%

Jan Feb Mar Apr Jun Aug OctMay Jul Sep DecNov

May 2006

Award:

� 1st prize, 2006 Korea

Trust Company Awards

by Korean Customers’

Forum

May 2006

Award:

� 1st prize, 2006 Korea

Trust Company Awards

by Korean Customers’

Forum

Apr. 2006

Award:

� 1st prize, Sustainability

of Management by Seoul

School of Integrated

Science & Technologies

� Global Brand

Competency Index by

Japanese Management

Association Consulting

Apr. 2006

Award:

� 1st prize, Sustainability

of Management by Seoul

School of Integrated

Science & Technologies

� Global Brand

Competency Index by

Japanese Management

Association Consulting

Mar. 2006

Award:

� 1st prize, Korea Brand

Power Index by KMAC

� 1st prize Korea Service

Management by Korea

Service Management

Promotion Agency

Mar. 2006

Award:

� 1st prize, Korea Brand

Power Index by KMAC

� 1st prize Korea Service

Management by Korea

Service Management

Promotion Agency

Sept. 2006

Award:

� 1st prize at Water purifier, Bidet and

Air purifier industry category in Korea

Well-being Customer Index by KSAC

�prize at Water purifier and Air purifier

industry category in Korea Customer

Satisfaction Index by KMAC

Sept. 2006

Award:

� 1st prize at Water purifier, Bidet and

Air purifier industry category in Korea

Well-being Customer Index by KSAC

�prize at Water purifier and Air purifier

industry category in Korea Customer

Satisfaction Index by KMAC

June 2006

Award:

� Korea Marketing Award by Korea

Management Association Consulting

� Korea Best Brand Award by

Hankyung Economic Daily

June 2006

Award:

� Korea Marketing Award by Korea

Management Association Consulting

� Korea Best Brand Award by

Hankyung Economic Daily

11

1. Revenue components1. Revenue components

� Rental program � Membership program3

Strong revenue stream with the solid income structure

Membership program :

� Outright sale with lump

sum payment

2

Product + maintenance service(5years)

*Note 1 : 5.8% of 2005 and 3.7% of ’06 revenues derived from other sources, including system kitchen,

and overseas sales without related rental revenues

*Note 2: Membership program is not valid for new subscribers signed up after Aug. 2006.

*Note 3: Rental and membership fees are quoted from Dec. 2006

3

2

Rental program :

1

Monthly rental fee :

Approx. W23,018

ASP :

Approx. W886,459

Monthly membership fee :

Approx. W13,794

82.4% 83.7%

‘05 ‘06

4.5% 4.4%

‘05 ’06

7.2% 7.6%

‘05 ’06

2. Revenue portion2. Revenue portion

Outright sale : Product+ 1 year maintenance

Maintenance service only

Product sale only

1

: either from 1 2or

12

Illustrative cash flow structure of rental business

*Note 1. VAT excluded rental fee

2. Cash outflow includes only direct expenses in sales

3. Consult with Appendix for detail information

Hypothetical cash flow structure of rental business (standard water purifier model : CP-01C)Hypothetical cash flow structure of rental business (standard water purifier model : CP-01C)

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

at sale yr1 yr2 yr3 yr4

Cash flow

� Cash inflow

▶ Registration fee

(W90,909)

� Cash outflow:

▶ COGS (W192,110)

▶ Sales Commission (W80,000)

▶ Installation (W17,386)

yr5

� Cash inflow

▶ Rental fee¹

(W409,091)

� Cash outflow:

▶ Sales Commission (W72,000)

▶ Visit Commission (W36,300)

▶ Filter, A/S, etc. (W25,476)

Meet Break Even Point within 1st year

** Penalty on the contract cancelled before year 1** Penalty on the contract cancelled before year 1

■ Subscribers: must pay the 50% of residual payment for one year

■ Sales agents: no commission is given after cancellation

1. At Sale : About W200K Loss

2. At the end of 1st year : About W70K Gain

13

� Abolishing ownership transfer

� Membership fee increasing

� Abolishment of KRW 0/50,000

registration fee

▶ Minimum registration fee of KRW 100,000

Expectation on new increased rental/membership fee scheme

� Rental fee increasing (5%)effect

▶ KRW 165bn gain in 5 years

� Membership fee increasing(23%) effect

▶ KRW 210bn gain in 5 years

Re-rental ratio increasing due to

Stable cash flow due to

Operation profit increasing due to

Profit Innovation

3

2

1

*Note 1. Rental fee increasing / registration fee change are applied to new customers (Aug. 2006)

2. Membership fee increasing is applied to new and incumbent subscribers (Nov. 2006)

14

Rental and Membership subscribers and cancellation trend

Subscribers (Rental + Membership)Subscribers (Rental + Membership)

Subscribe

r CAGR:

16.3%(’03–

’06)

2003 2004 2005 2006

Rental Membership

2,361

305

2,867

380

3,225

550

3,499

658

2,644

3,246

3,7754,157

Continuous growth and stable cash flow generation occurring from broad customer base

(unit: 000)

Rental cancellation trend (monthly base)Rental cancellation trend (monthly base)

2004 2005 2006

1.04% 1.02%

1.09%

2004 2005 2006

0.55% 0.59%0.63%

[All products]

[Water purifier]

15

Number of Cody agents

Outstanding distribution channel supported by an extended sales network

● Sales and maintenance service

: Coway’s unique rental sales strategy

● Expand cross-sell opportunities(e.g. Bidet)

● Leverage allowing the company penetrating

into new businesses

3,085

4,828

7,745

8,5619,434

10,751

'00 '01 '02 '03 '04 '05 '06

Sales Organization

*Note : CH - the team managing rental and outright sales

(including Rental House) as of Dec. 2006

1,487

Woongjin Coway’s unique CODY agent system enables the company to expand

marketability and cross selling opportunities that eventually increase customers base

(Unit : person)

Sales OnlySales &

Maintenance

CODY’s10,751

CH*4,339

Sales Headquarter

16

Growth strategy

Market expansion

Cross Selling ratio

increasing

Oversea business

R&D

� New distribution channel → various customer base

� B2B market → e.g.)specialized bidet launching for corporate use

� Bundle Package product

→ categorize products depending on features for repurchase

※ cross-selling ratio : 1.3 unit /customer (as of end of 2006)

� Distribution channel expansion

→ strategic partnership & contract with local sales

� Full production line up for export

→ localization in product development

� New item / outsourcing

� Enhancing R&D and Design feature

17


Financial ReportsFinancial ReportsFinancial Reports



18

Sales & profit trend

EBITDA (unit : KRW bn)EBITDA (unit : KRW bn)Sales (unit : KRW bn)Sales (unit : KRW bn)

EBIT (unit : KRW bn)EBIT (unit : KRW bn) EPS (unit : KRW)EPS (unit : KRW)

1,0081,118

2005 2006 2007(E)

1,343

274299

2005 2006 2007(E)

362

97112

2005 2006 2007(E)

175

9511,019

2005 2006 2007(E)

1,598

13.0%

10.0%9.6%

27.2% 26.7% 26.9%

● Margin

● Margin

19

Cash and DebtCash and Debt

Other financial information

CAPEX (Rental asset and other capital expenditure) CAPEX (Rental asset and other capital expenditure)

2004 2005

116

69

191

9768

2006

93

132

39

*Net Debt ratio: 21.2%

Rental asset CAPEX (R&D included)

Debt Cash Net debt

* Note : Figures in 2004 have been quoted from pre-merger Woongjin Coway Development

(Unit : KRW billions)


2005 2006 2007(E)

166165176

4324

66

20

Focusing on enhancement of shareholders’ value

Dividend payout ratio Strong cashflow generation

� EBITDA (KRW bn)

Focus on

enhancing

shareholder

value

� Share buybacks and cancellations

▶ 2003: 1 million share buyback


▶ 2005: 3 million shares cancelled

(purchased in 2004)


Increase company

transparency

* Note : 1. DPS : 2004 figure of pre-merger Figures of Woongjin Coway

250(34%)

340(40%)

400(40%)

2004 2005 2006

Share buyback &

cancellation

� Woongjin Coway’s DPS1 (KRW)

� Transparency increasing due to

merger

� Active IR performance

▶ Quarter result release presentation

▶ periodical oversea NDR

274

299362

2005 2006 2007(E)

21

AppendixAppendix

Income StatementIncome StatementIncome Statement

Balance SheetBalance SheetBalance Sheet

Cash Flow DemonstrationCash Flow DemonstrationCash Flow Demonstration

22

Income statement

* Note : 1. 2004 figures are for Woongjin Coway Development


2004 2005 2006

Sales 827.8 1,008.1 1,117.8

Growth 0.1% 21.8%

COGS 303.8 363.7 380.4

%of sales 36.7% 36.1% 34.0%

Gross profit 523.9 644.4 737.4

Gross profit margin 63.3% 63.9% 66.0%

Selling and administrative expenses 412.5 547.5 625.1

Operating income 111.5 96.8 112.3

Operating income margin 13.5% 9.6% 10.0%

Non-operating income (expenses) -10.9 -10.9 -9.9

Ordinary income 100.6 86 102.4

Ordinary income margin 12.2% 8.5% 9.2%

Income tax 29.6 25.1 27.5

Net income 71.0 60.9 74.9

Net income margin 8.6% 6.0% 6.7%

10.9%

23

Balance sheet

* Note : 2004 figure are for Woongjin Coway Development


2004 2005 2006

Cash 1.0 18.6 34.5

Short-term financial instruments, investment securities 0.0 0.2 4.4

Trade, accounting and other receivables 31.6 63.3 125.1

Inventories 37.8 42.2 80.4

Other current assets 92.5 136.4 161.4

Total current assets 162.9 260.7 405.9

PPE(Property, Plant, and Equipment ),net 337.4 369.8 374.2

Intangibles, net 0.6 23.7 28.2

Other non-current assets 25.8 61.0 76.9

Total assets 526.8 715.2 885.1

Trade payables 76.0 32.6 29.3

ST borrowings 0.0 69.8 101.7

Accounts payable-other 61.5 75.7 73.5

Other current liabilities 112.3 176.1 227.3

Total current liabilities 249.8 353.9 431.8

Debentures 36.0 0.0 0.0

Other non-current liabilities 36.1 19.0 14.6

Total liabilities 321.9 373.2 446.3

Total shareholders' equity 204.9 342.0 438.6

Total liabilities and shareholders' equity 526.8 715.2 885.1

24

Product: CP-01C (Water purifier)Product: CP-01C (Water purifier)

Cash flow demonstration(Profit analysis per product unit)

* Note : 1, One unit of water purifier rental contract by Cody excluding VAT

2. Cash outflow includes only direct sales fee

(Unit: KRW)

*Avg. usage period of Water purifier: 4years

Inflow At sale year 1 year 2 year 3 year 4 year 5

registration fee 90,909

Monthly rental 409,091 310,909 310,909 310,909 310,909

Subtotal 90,909 409,091 310,909 310,909 310,909 310,909

Outflow

COGS 192,110 0 0 0 0 0

Installation fee(Outsourcing) 17,386 0 0 0 0 0

Sales commission 80,000 72,000 0 0 0 0

Maintenance commission 36,300 36,300 36,300 36,300 36,300

Filter 14,400 14,400 14,400 14,400 14,400

A/S 7,080 7,080 7,080 7,080 7,080

Other costs 3,996 3,996 3,996 3,996 3,996

Sub total 289,496 133,776 61,776 61,776 61,776 61,776

0 0 0 0 0

Net cash flow (198,587) 275,315 249,133 249,133 249,133 249,133

Accumulated cash flow (198,587) 76,728 325,861 574,994 824,127 1,073,260

Woongjin Coway IR Presentation Materials...at sale yr1 yr2 yr3 yr4 Cash flow Cash inflow...

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