Investor Presentation. February 2017

Transcription

1 Investor Presentation February 2017

2 Disclaimer 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 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. 2

3 Contents Earnings Releases 2016 Key Highlights Revenue/Profit Health Appliance Business Overseas Business Home-care & Cosmetics Business Shareholder Return Policy Business Plan Strategic Initiatives: Back to Basics 2017 Earnings Outlook Business Strategy by Focus Area 3. Appendix Consolidated Revenue/Profit Non-consolidated Financial Reports Consolidated Financial Reports Consolidated Subsidiary Results 3

4 Key Highlights Ice-Making Water Purifier Issue Proactive response led to swift recovery of new sales performance - Prompt recall and refund of rental fees for all affected products - Infinite Responsibility Committee and TQA 1) center directly overseen by the CEO - As a result, 2016 fourth quarter rental gross adds recorded a historical high among all fourth quarters Rental net churn has stabilized - December 2016 net churn was 1.18%, stabilized from 3Q peak of 1.53% Robust Growth in Home-care (Mattress) Business Strong growth of 44% in revenue and 21% in number of accounts - Driven by 23% increase in door-to-door salesforce productivity, and increase in number of door-to-door sales people from 853 in 2015 to 923 in 2016 Strong Momentum in Overseas Business Strong revenue growth in China and Malaysia - Strong growth in air purifier sales in China - Signed MOUs with Haier (water purifier) and Konka (bidet) for China market expansion - Accelerated growth in Malaysia subsidiary revenues and number of accounts Note 1. Trust & Quality Assurance 4 Rental Gross Adds Rental Net Churn 1.00% 1.01% Q 2Q 3Q 4Q % % 381 [Unit: 000] 359 4Q 15 [Unit: KRW bn, accounts] 321K 265K ODM/Dealers [Unit: KRW bn, accounts] Export to Subsidiaries Export Revenue Malaysia Revenue/Accounts K 272K

5 1-2. Revenue and Profit 2016 Revenue KRW 2,204.5 bn (+2.0% YoY) Operating Profit KRW bn (-20.4% YoY) Net Profit KRW bn (-21.2% YoY) Revenue 1) Operating Profit 2) Net Profit 3) [Unit: KRW bn] [Unit: KRW bn/ : Margin] [Unit: KRW bn/ : Margin] Q 15 4Q % 18.8% 21.2% 15.3% 4.1% 16.7% 14.3% 3Q 16 4Q 15 4Q 16 3Q 16 4Q 15 4Q 16 3Q 16 2, ) 2, ) 2, ) % 16.2% 16.7% 12.5% 11.1% Notes K-IFRS Parent 1. FY16 Adjusted Revenues : KRW 2,272.4 bn (+5.1% YoY), excluding revenue deduction of W67.9 bn from recall of ice-making water purifiers 2. FY16 Adj. OP : KRW bn (+5.6% YoY), excluding one-off expenses of W120.1 bn from recall of ice-making water purifiers (*Reduced from previous W122.1 bn due to write-backs of KRW 2 bn in 4Q'16) 3. FY16 Adj. NP : KRW bn (+5.5% YoY), excluding one-off expenses of W93.2 bn from recall of ice-making water purifiers 5

6 1-3. Health Appliance Business Rental Net Adds Turned Positive Driven By Strong Gross Adds in 4Q'16 Rental Gross Adds Rental Net Adds [Unit: 000] [Unit: accounts] 1,401 1, K K 60K 26K 17K 1Q 2Q 3Q 4Q Strong recovery in 4Q rental gross adds performance and full-year 2016 rental gross adds - Historical high 4Q rental gross adds of 381K (+5.8% YoY, +33.5% QoQ) - Full-year rental gross adds remained high at 1,401K ( 14: 1,330K, 13: 1,166K, 12: 1,219K) (98)k 1Q 2Q 3Q 4Q Rental net adds turned positive in 4Q'16 - Rental net adds +26K in 4Q'16 - Rental net adds +17K in

7 1-3. Health Appliance Business Rental Net Churn Stabilized to 1.2%, and Rental Asset Disposal Loss also Stabilized to 3% of Total Rental Revenue Rental Net Churn 1) Rental Asset Disposal Expense 2) Rental Net Churn Rental Asset Disposal Expense % of Rental Revenue [Unit: KRW bn] 1.05% 1.00% 1.00% 0.95% 0.98% Q Rental net churn stabilized in 4Q 16 - Rental net churn: 1.20% in % - Monthly rental net churn stabilized to 1.18% in December 2016, from a temporary increase in 3Q % 3.1% 1.01% 1.26% % % 2.9% 2.7% % 2.8% 2.6% 2Q 3Q 4Q Q 2Q 3Q % Successfully maintained rental asset disposal loss at a manageable level - Rental asset disposal expense: KRW 45.9 bn in Rental asset disposal expense rate remained at around 3% level 4Q Notes 1. Rental Net Churn (2012 and 2012 before): Excluding non-performing accounts 2. 2Q'16 Adj. Rental asset disposal expense : W9.3 bn, excluding revenue deduction of W67.9 bn from recall of ice-making water purifier and one off cost of W3.1 bn 7

8 1-4. Overseas Business 2016 Overseas Business Revenue KRW bn (+45.4% YoY) Export Revenue Overseas Subsidiaries Performance ODM/Dealers Export to Subsidiaries [Unit: KRW bn] [ 말레이시아 [Malaysia 법인 Subsidiary] ] Revenue [Unit: KRW bn, accounts] Total Accounts Q'15 4Q'16 3Q' Export revenue showed +45.5% YoY - ODM/dealers revenue increased to KRW bn (+38.9% YoY), driven by strong growth in China ODM air purifier revenue - Export revenue to subsidiaries increased to KRW bn (+52.7% YoY) driven by strong sales to Malaysia and other subsidiaries K 4Q'15 4Q'16 3Q' [U.S. Subsidiary] Revenue Total Accounts K Strong growth in Malaysia and U.S K K 4Q'15 4Q'16 3Q' Malaysia revenue: KRW 143 bn (+46.3% YoY) : Plan to strengthen door-to-door salesforce and enhance marketing * Rev. Growth based on local currency: 4Q'16 (+62.5% YoY, +18.7% QoQ)/2016 (+52.2% YoY) U.S. revenue: KRW 60.2 bn (+5.2% YoY) 8

9 1-5. Home-care and Cosmetics Business Home-care Business Revenue KRW bn (+44.3% YoY) Cosmetics Business Revenue KRW 74.2 bn (-10.7% YoY) Home-care Cosmetics Revenue Financial Lease Revenue 1) [Unit: KRW bn, accounts] [Unit: KRW bn, accounts] Revenue Total Accounts Revenue Total Accounts K 321K 4Q'15 4Q'16 3Q' Q'15 4Q'16 3Q' Home-care revenue KRW bn (+44.3% YoY) mattress gross adds increased to 130K (+19.1% YoY) due to improvement in productivity of home-care doctors as well as CODYs - 4Q'16 revenue decreased to KRW 43.8 bn (-5.3%YoY) due to 1) decline in the number of operating lease account and 2) change in contract cancellation provision rate from 6% in 2015 to 16% in 2016 Note 1. Financial Lease: Record 5yr/6yr revenue at the time of the sales as present value Cosmetics revenue KRW 74.2 bn (-10.7% YoY) - Door-to-door sales channel revenue: KRW 47.8 bn - 2H 16 door-to-door channel revenue increased by +11.1% YoY (vs 2H 15) and +12.1% HoH (vs 1H 16) driven by increase in the number of salesforces - Retail sales channel revenue of KRW 26.4 bn : Plan to further expand retail channels including TV home shopping 9

10 1-6. Shareholder Value Enhancement Initiatives 2016 DPS Increased to KRW 3,200 Plan to Implement Proactive Shareholder Value Enhancement Initiatives from 2017 Shareholder Value 2016 Dividends Enhancement Initiatives [ ] DPS Dividend Yield Cash Dividend KRW 1,660 KRW 2,000 KRW 2,800 [KRW bn] KRW 3,200 [KRW bn] Increase DPS and dividend yield for FY16 Implement quarterly dividends from 1Q 2017 KRW 1,050 [KRW 78.4 bn] 2.2% 1Q'13 1) [KRW bn] 2.6% 2013 [KRW bn] 2.3% % % 2) 2016 Implement KRW 100 bn share buyback programs Cancellation of KRW 70 bn of treasury shares in To be implemented after the current buyback program is completed Notes 1. Paid quarterly dividend in dividend yield based on volume weighted average share price of Dec 21st~27th of W89,972) 10

11 Business Plan Strategic Initiatives: Back to Basics 2017 Earnings Outlook Business Strategy Health Appliance Business Overseas Business Cosmetics Business Creating Shared Value 11

12 2-1. Strategic Initiatives: Back to Basics Business Concept Redesign Coway Trust Coway Pride Coway Fresh Restore trust from customers and CODY Network Solidify leadership in new technology and market position Greater Leap Forward Through New Business Growth Promote maximum accountability for quality enhancement Improve service quality Promote trust marketing Enhance vision for direct sales network Strengthen CODY network Introduce market-leading products with new technologies Secure innovative technologies Expand IoCare service platform Demonstrate strong China business growth Realize further growth in Malaysia subsidiary revenue Differentiate strategy by geography (US, Thailand) Turnaround cosmetics business Generate stable health appliance revenue growth by restoring trust from customers and revitalize the CODY network Solidify market leadership and secure additional growth from new technologies 12 Expand China and other overseas businesses turnaround cosmetics business

13 Earnings Outlook Consolidated Standalone Revenue +12.6% 2,676.0 [Unit: KRW bn] Revenue OPM +10.2% 2,430.0 [Unit: KRW bn] OPM 2, % % 2, % % 14.3% (E) 16.7% (E) Accounts Rental Gross Adds Overseas Revenue (Consolidated) 5,704K 5,938K 1,401K [Unit: 000] 1,490K ODM/Dealers Subsidiaries (local revenue) [Unit: KRW bn] (E) (E) (E) [Accounting standard: K-IFRS Consolidated Financial Reports] 13

14 Business Strategy Health Appliance Business Restore Trust from Customers and Revitalize CODY Network to Pave the Way for Continued Success Promote maximum accountability for quality enhancement - Improve toxic substance control and production quality : Integrate quality functions to TQA 1) and ensure TQA s independence - Improve service quality (CSQ) 2) : Emphasize hygiene care and reinforce monitoring of key maintenance service indicators Advertising/marketing efforts to restore trust - Implement combined brand and new product marketing campaign - Operate the Infinite Responsibility Committee and communicate operational improvement activities on real-time basis Enhanced vision for the CODY sales force - Reorganize CODY system based on performance metrics and improve retention rate of new CODYs - Maintain growth momentum by expanding Home-care organization - Enhance retail, B2B, home-shopping, on-line channels Notes 1. Trust & Quality Assurance 2. Coway Service Quality 14

15 Business Strategy Health Appliance Business Secure Growth Levers from Pioneering Products with Innovative Technologies Launch market-leading new products - Apply new ice-making technology - Superior hygiene mattress products by allowing topper/cover replacement Competitive edge in innovative new technologies - 18 certified Water Specialists (WQA Approved) as well as the largest environmental technology R&D center in Korea Establish IoCare service platform - Offer intelligent well-being care services by IoCare (trust / safety / hygiene / comfort) - Release Wi-Fi based new products that enable real-time connections : Air monitoring, humidification sterilization alarm, real-time RO filter monitoring, failure diagnosis - Prepare to launch services connected with Amazon s Alexa 15

16 Business Strategy Overseas Business Establish Foundation for Mid/Long-term Growth of China Business Expand business partnerships - ODM partner: expand air purifier supply and secure business sustainability - Haier: launch first new product by year-end; plan to supply dedicated products - Konka: establish full product lineup and conduct a joint marketing campaign within 1H 17 Enhance product competitiveness and infrastructure - Water purifier: develop UTS (offline, Haier) as well as localized CT type - Air purifier: develop high capacity/robot air purifiers (online) and air refreshers - Bidets/power blender: strengthen product planning for online/ home shopping - Upgrade component sourcing EMS companies via the establishment of the DSQ 1) center in China Note 1. Development, Sourcing, Quality 16

17 Business Strategy Overseas Business Tailored Strategies for Each Local Subsidiary Continue strong momentum of Malaysia business - Target account ( 16: 450K 17: 670K) - Expand sales in underdeveloped regions and improve profitability : Further expand to the premium segment by targeting Chinese-origin customers - Strengthen internal infrastructure to improve service quality - Strengthen the Water Specialist branding efforts Lay the cornerstone for growth of U.S. business - Strengthen door-to-door product line-up : Renewal of Cold/Hot water purifier model and introduce Air-Mega to door-to-door offerings - Enter into the mainstream retail market : Develop premium air purifiers connected to Amazon Alexa : Target mid-to-large sales channels 17

18 Business Strategy Cosmetics Business Sales Channel Expansion and Shift in Business Model Expand door-to-door sales channels - # of salesforces: +20% YoY - Establish a new smart door-to-door sales team (NEO) (1) comprised of young college graduates Enhance TV home shopping product line-up - Develop hit products through channel-exclusive product offerings Expand on-line channel - Korea: increase sales by online exclusive product line-up (e.g. Sunscreen) - China: increase online based sales by expanding SKUs Promote a business model that proposes products and solutions based on platform devices Note 1. New Expert Order 18

19 Business Strategy Creating Shared Value (CSV) Pursue Social Responsibility by Creating Shared Value Globally Promote CSV activities in Korea - Dongchimi Kimchi Making campaign : Using water purified by large-scale water purifiers - Wi School campaign to support start-ups : Applying know-hows gained through operating CODY network Expand overseas CSV activities - Develop and manage c.1,000 wells with Cambodia Well campaign : Improve water quality and resolve the drinking water shortage issue in Cambodia - Sponsored marathon events in Malaysia ( COWAY RUN ) : Provide purified water for the Coway Run event 19

20 APPENDIX

21 Consolidated Revenue/Profit 2016 Revenue KRW 2,376.3 bn (+2.6% YoY) Operating Profit KRW bn (26.9% YoY) Net Profit KRW bn (-29.1% YoY) Revenue 1) Operating Profit 2) Net Profit 3) [Unit: W bn] [Unit: W bn/ : Margin] [Unit: W bn/ : Margin] % 18.3% 14.3% 15.7% 4.1% 12.6% 4Q 15 4Q 16 3Q 16 4Q 15 4Q 16 3Q 16 4Q 15 4Q % 3Q 16 2, ) 2, , ) ) 20.0% 14.8% 14.3% % 10.2% Notes K-IFRS Consolidated 1. FY2016 Adj. revenue KRW 2,444.2 bn (+5.6% YoY), excluding revenue deduction of KRW 67.9 bn from recall of ice-making water purifiers 2. FY2016 Adj. OP : KRW bn (-0.9% YoY), excluding deduction of one off cost KRW bn from recall of ice-making water purifiers (*Reduced from previous KRW bn due to write-backs of KRW 2 bn in 4Q'16) 3. FY2016 Adj. NP : KRW bn (-1.9% YoY), excluding deduction of one off cost KRW9 3.2 bn from recall of ice-making water purifiers 21

22 Financial Reports (Parent) Balance Sheet (Unit: KRW bn) Dec. 16 Dec. 15 <Assets> 1, ,742.4 Current Assets Cash and cash equivalents Accounts receivable Inventories Non-Current Assets 1, ,084.3 Fixed assets Affiliates & Subsidiaries Intangible assets <Liabilities> Current Liabilities ST Borrowings Current portion of bonds - - Current portion of LT borrowings - - Non-current liabilities LT Borrowings - - Corporate bond - - <Shareholders' equity> 1, ,269.4 Debt to Equity Ratio 58.0% 37.3% Net Debt to Equity Ratio 23.9% Net Cash Income Statement (Unit: KRW bn) 4Q'16 4Q'15 YoY Revenue (4.9%) COGS (0.4%) Gross Profit (7.0%) SG&A (1.9%) Operating Profit (18.1%) Margin(%) 18.8% 21.8% (3.0%)P Other Income ,846.9% Other Expenses (7.6) Financial Income (17.0%) Financial Expenses % Profit before tax % Corporate tax (3.4%) Net Income % Margin(%) 16.7% 15.3% 1.4%P 22

23 Financial Reports (Consolidated) Balance Sheet (Unit: KRW bn) Dec. 16 Dec. 15 <Assets> 1, ,775.4 Current Assets Cash and cash equivalents Accounts receivable Inventories Non-Current Assets 1, ,122.1 Fixed assets Intangible assets <Liabilities> Current Liabilities ST Borrowings Current portion of bonds - - Current portion of LT borrowings - - Non-current liabilities LT Borrowings Corporate bond - - <Shareholders' equity> 1, ,238.2 Debt to Equity Ratio 66.3% 43.4% Net Debt to Equity Ratio 24.1% Net Cash Income Statement (Unit: KRW bn) 4Q'16 4Q'15 YoY Revenue (2.7%) COGS % Gross Profit (6.0%) SG&A % Operating Profit (25.0%) Margin(%) 15.7% 20.4% (4.7%)P Other Income % Other Expenses (41.6%) Financial Income (7.1%) Financial Expenses % Profit before tax (15.9%) Corporate tax (20.7%) Net Income (14.2%) Margin(%) 12.6% 14.3% (1.7%)P 23

24 Consolidated Results of Subsidiaries 5 Entities (4 Overseas Subsidiaries, Coway Entech) (Unit: W bn) 4Q'16 4Q'15 YoY 3Q'16 QoQ Malaysia Revenue % % OP % % Margin 5.2% 4.6% - 5.0% - Malaysia 4Q'16 revenue KRW 42.4 bn (+60.8% YoY, +15.3% QoQ) 4Q'16 accounts 431K (4Q'15: 272K, +58.2% YoY) Continued strong growth in rental and lump-sum sales Local currency basis: +62.5% YoY, +18.7% QoQ U.S. China Revenue (5.4%) % OP (0.2) - Margin 0.1% 3.1% U.S. 4Q'16 revenue KRW 15.2 bn (-5.4% YoY, -10.1% QoQ) 4Q'16 accounts 102K (4Q'15: 93K, +9.9% YoY) Revenue decreased slightly due to weak retail lump-sum sales Local currency basis: -5.5% YoY, +6.2% QoQ Revenue % % OP (0.2) (0.4) - (0.6) - Margin Thailand Revenue (3.0%) % OP (0.4) (0.4) - Margin - 0.1% - - Coway Entech Revenue % OP (0.9) - Margin 17.1% China 4Q'16 revenue KRW 4.2 bn (+31.5% YoY, % QoQ) Strong revenue growth due to strong air purifier ODM sales Thailand 4Q'16 revenue KRW 1.2 bn (-3.0% YoY, +2.0% QoQ) QoQ revenue decreased due to weak retail channel sales Coway Entech 4Q'16 revenue KRW 23.6 bn (+206.7% QoQ) Merged with Green Entech on August 16,