LG Saenggeon, 2Q Operating Profit 216.6 Billion Won Amid China Lockdown...35.5% Decrease YoY (Comprehensive)

Sales of 1.8627 trillion KRW... 7.9% decrease YoY
Operating profit improved by 23.4% compared to Q1

LG Household & Health Care's sales and operating profit trends for the second quarter of 2022. Data from LG Household & Health Care

[Asia Economy Reporter Moon Hyewon] LG Household & Health Care announced on the 28th that its sales in the second quarter of this year amounted to 1.8627 trillion KRW, down 7.9% from the same period last year, and operating profit decreased by 35.5% to 216.6 billion KRW. Net profit also declined by 44.3% to 126 billion KRW.

An LG Household & Health Care official explained, "The strengthened lockdown policies in China, which began at the end of March, had a significant impact on our local business throughout the second and fourth quarters, and the ongoing Ukraine crisis led to rising raw material prices, making it difficult to achieve growth in sales and operating profit."

Compared to the first quarter of this year, sales and operating profit in the second quarter improved by 13.2% and 23.4%, respectively. This improvement is attributed to the beauty (cosmetics) business, whose sales and operating profit increased by 21.9% and 35.2% quarter-on-quarter. Total beauty sales, including daily beauty, reached 1.1841 trillion KRW, with operating profit of 138.8 billion KRW.

The beauty (cosmetics) business recorded second-quarter sales of 853 billion KRW, down 23.6% year-on-year, and operating profit of 93.3 billion KRW, down 57.4%. Compared to the previous quarter, sales improved by 21.9% and operating profit by 35.2%. LG Household & Health Care explained that the resurgence of COVID-19 in China led to lockdowns in major cities such as Shanghai and most cities including Beijing, resulting in restrictions on going out, store closures, and logistics shipment limitations, which severely impacted the China business in the second quarter.

However, despite the depressed consumption environment in China, the ‘Whoo’ brand achieved first place in beauty sales on Douyin and Kuaishou, emerging platforms, during the 6.18 shopping festival, the largest event in China in the first half of the year.

HD Beauty (home & daily beauty) and Refreshment (beverages) achieved growth in both sales and operating profit despite rapidly rising cost burdens. The HD Beauty business recorded second-quarter sales of 543.4 billion KRW, up 9.5% year-on-year, and operating profit of 59.6 billion KRW, up 1.4%. In the gray hair cover market, the launches of ‘Ryeon Muldeulim’ and ‘Dr. Groot Black Recover’ received positive responses.

LG Household & Health Care stated that despite ongoing cost pressures from rising raw material and logistics costs, they realized not only high sales growth but also profit growth thanks to the strong performance of premium daily beauty brands. ‘Dr. Groot’ and ‘Belmore’ upgraded their product portfolios through renewals that enhanced efficacy and differentiated ingredients, while ‘Physiogel’ complemented its portfolio, which was concentrated in the winter season, by launching refrigerated cosmetics ‘Physiogel Cold Therapy’ and sun care products.

The Refreshment (beverage) business achieved second-quarter sales of 466.4 billion KRW, up 13.9% year-on-year, and operating profit of 63.7 billion KRW, up 10.0%. Growing interest in health and dieting drove sales growth of zero-calorie beverages such as ‘Coca-Cola Zero’ and ‘Sprite Zero’, as well as low-calorie drinks like ‘Monster Energy Ultra’. Since peaking in April, the number of COVID-19 cases has trended downward, leading to increased outdoor activities, which in turn boosted sales at restaurants, movie theaters, and rest stops. Meanwhile, the online channel, which grew rapidly during the COVID-19 period, continued steady growth even as outdoor activities increased, confirming changes in consumer purchasing patterns.

This content was produced with the assistance of AI translation services.