Introduction to CJ CheilJedang
CJ CheilJedang IR
Sep 2018
This financial information in this document are consolidated earnings results based on K-IFRS. This document is provided for the convenience of investors only, before the external audit on our 2017 financial results is completed. The audit outcomes may cause some parts of this document to change. Contents
I. Company Overview Pg.3 II. Key highlights Pg. 6 III. Food Pg. 7 IV. BIO Pg. 13 V. Feed & Livestock Pg. 17 VI. 2018 Outlook by division Pg. 19 VII. Appendix Pg. 22
2 I. Company Overview
Shareholders’ Stake Revenue mix (2017)
KRW9,372bn Others 20.0% Feed & CJ Treasury Stocks Livestock Processed Food Corp 23% 2.4% 44.6% 33% National Pension Bio Service 23% 11.4% Foodstuff 21% Foreign Investor 20.7% Jayhyun Lee & related parties * As of 30 Apr, 2018 0.9% * Excluding CJ Healthcare
Snapshot (Apr 2018) OP mix (2017)
Outstanding Shares 15,053,186 shares KRW475bn Feed & Bio Livestock Market Cap KRW 5,163bn 29% -5% Processed Food 3M Daily Trading Value KRW19.4bn 59% Foodstuff 17% Foreign Investor Stake 20.7%
* As of 30 Apr, 2018 * Excluding CJ Healthcare
3 I. Company Overview CJ Group Holding Structure
CJ Corp. (4,639/12,461)
47.0% 44.6% 55.0% 96.0% 39.4% 40.0% 39.0% CJ Freshway CJCJ CJ OliveNetworks CJ Foodville CJ E&M CJ O Shopping CJ CGV (423/232) (4,840/6,416) (NA/478) (NA/181) (3,544/2,260) (1,389/1,557) (1,439/765)
40.2% 46.5% 71.3% 59.3% CJ Logistics CJ Seafood Studio Dragon CJ Hello (3,137/2,992) (98/61) (2,596/376) (650/1,028)
* Unit: KRW bn
• As of March 2018 (Market Cap/ Book Value)
4 I. Company Overview
History Globalization
Founded CheilJedang Co., Ltd. (the first Overseas sales account for 42% of total 1953 manufacturing business of Samsung Group) revenue of W9.9tr (2017)
Commenced Animal Feed business 1970s Launched Dasisda, No.1 seasoning brand Overseas Commenced Pharmaceutical business 42% 1980s Domestic Constructed first lysine plant in Indonesia 58%
1993 Separated from Samsung Group
Began overseas Animal Feed business in 1990s SE Asia Overseas sales portion by division 2000~ Spun off non-core divisions 2006 while strengthening core biz by acquisition s 97%
70% 2007 Spun off from CJ Corp
2011 Acquired CJ Logistics 16% 3%
2018 Disposal of CJ Healthcare Processed Foodstuff Bio Feed & Food Livestock
* Overseas revenue excludes exports from Korea 5 II. Key highlights Sales breakdown: Food 52%, Non-Food 48% (Excluding CJ Logistics, 2017) Diversified business portfolio (Processed20.0% Food/ Foodstuff/ Bio/ Feed & livestock) with stable margins 18.0% Revenue Profitability 16.0% Healthcare Feed & Livestock Bio Foodstuff Processed Food 29.3% 14.0% 28.8% 28.3% 2013~2017 CAGR: 8% W9.9tr W9.9tr 12.0% GPM 26.7% 5% 5% W8.9tr 6% 10.0% 25.4% W8.2tr 21% 21% W7.4tr 6% W7.2tr 22% 6% 7.2% 6% 22% 8.0% 7.0% 21% 22% 22% 5.9% 18% 5.6% 21% 4.8% 20% 6.0% 21% 20% OPM 20% 20% 3.9% 22% 3.4% 24% 4.0% NPM 25% 24% 2.5% 2.2% 1.2% 2.0% 29% 32% 32% 30% 28% 28%
0.0% 2013 2014 2015 2016 2017 2017 2013 2014 2015 2016 2017 * Changes in accounting reflected from 2017, refer to P.25 6 III. Food Division 1) Overview Resilient top line thanks to solid Processed Food revenue growth from HMR, flagship products, and overseas expansion Stable profitability with greater contribution from Processed Food
Annual sales trend Operating profit and OPM (Unit: W bn) 8% 8% Foodstuff Processed Food 8% 7% 6% 6%
2013~2017 CAGR 363 352 Processed Food: 12% 349 Foodstuff: 3% 322 297 1,971 1,961 1,870 222 1,782 1,749 1,742
3,139 3,129 2,742 2,368 2,019 2,098
2013 2014 2015 2016 2017 2017 2013 2014 2015 2016 2017 2017
* Changes in accounting reflected from 2017, refer to P.25 7 III. Food Division 2) Product portfolio Processed Food: diversified products with over 2,000 SKUs Foodstuff: diversified portfolio from sugar to flour to oil products Processed Food Foodstuff 5% Trading 10% Others 3% Global (Vietnam, China) 7% Starch 16% Global (US, China, Vietnam, Russia, etc)
7% Noodle/Sauce 35% Oil 7% Paste 8% Seasoning Microwavable 9% Rice 21% Flour 11% Fresh/Sea Food
13% Frozen Food
29% Sugar Processed 19% Meat
* % of Processed Food revenue (2017) * % of Foodstuff revenue (2017) 8 III. Food Division: Processed Food 3) Competitiveness Dominant No.1 player in Processed Food market on the back of good taste and superior brand
Market Presence Key product m/s trend
“Revenue From Processed Food” 51% Soybean Paste 3.1 (Unit: W tr) 50% 46% Red pepper paste 2.4 31% Kimchi 2.2 2.2 2.2 47% 2.0 69% Hetbahn 10% 1.5 65% 79% Seasoning 78%
52% Canned ham 45% 24% Cooked Frozen 18% 43% 22% Dumpling
2013 2014 2015 2016 2017 * Linkaztec * As of 2017 9 III. Food Division: Foodstuff 3) Competitiveness Stable earnings for the company with strong market leadership Constant No.1 M/S of best-known brand ‘Beksul’
82% 71% 56% 46% 40% 27% 14%
Sugar Flour Cooking oil Sugar Flour Cooking oil Starch
* Linkaztec, as of 2017, B2C only, Based on revenue * CJCJ, as of 2017, B2C+B2B, Based on sales volume
10 III. Food Division: Processed Food 4) Overseas Business 18 manufacturing facilities in US, China, Vietnam, Russia, etc Global revenue accounts for 16% of total Processed Food revenue
Russia (1) Products: Pelmeni (Russian dumping) Products: Chinese pickle, Dumping, Seasoning, Tofu, etcs China US (6) (6) Japan Products: Dumpling, Noodle, Sauce, Products: Dumpling, Fishball, Kimchi, etcs (1) Paste, Seaweed, etc. Vietnam (3)
Indonesia Products: Kimchi, etc. (1) ’13 Sales W291bn ‘17 Sales W509bn
Vietnam Others Products: Premix 14% 3% Others 3% China 11% China US US 28% 55% Subsidiaries 87% Joint Venture
* Overseas revenue excludes exports from Korea 11 III. Food Division: Processed Food 5) Investment Establish a “World-Class Smart Factory” to address growing demand and lead food industry in Korea
Manufacturing Complex Detail
Location 330,000sqm in Songdu Industrial complex, Jincheon, Chungcheongbuk-do
Ph.2 1.HMR Investment & Products 2.Kimchi 3.Frozen Pizza CAPEX Products Notes Hetbahn Commence Ph.1 W541bn Cooked Frozen Manufacturing Processed Meat from Oct. 2018 Ph.1 1 HMR Commence 1.Hetbahn Ph.2 W361bn Kimchi Manufacturing 2 2.Cooked Frozen Frozen Pizza from May. 2019 Processed Meat 3 Expected effects - Establish a flexible manufacturing system and 2 1 strengthen cost competitiveness - Sales and OP expected at W1.2tr and 1 W170bn in 2025
12 IV. BIO 1) Overview Improved product mix with higher non-commodity business Stable profitability with increasing high-margin Specialty bio biz
Annual sales and OPM Change in revenue product mix
(Unit: W bn) Feed Additive Food Additive 21% 8% 8% 8% 6% 20% 22% 25% 23% 3% 2% 79% 80% 78% 77% 2013~2017 CAGR: 10% 75% 2,106 2,113 2013 2014 2015 2016 2017 1,802 1,740 Operating profit breakdown 1,473 1,478 Feed Additive Food Additive
43% 41% 47% 57% 59% 53% 104% 150% 53% -4% -50% ※ 2013Feed Additive:2014 Lysine, Methionine,2015 Threonine,2016 Tryptophan,2017 Valine,2017 Vegetable High Protein 2013 2014 2015 2016 2017 Food Additive: Nucleotide, MSG, Arginine, Haide * Changes in accounting reflected from 2017, refer to P.25 13 IV. BIO 2) Competitiveness Leading marketing position in key amino acid markets Global No.1 m/s in Lysine & Tryptophan and Nucleotide & Valine
Lysine Tryptophan Evonik Others Others Fufeng 25% 5% 1% 32% 8%
Julong 51% 18%
Meihua AJI 8% 12% GBT Eppen AJI 11% 12% 17%
Nucleotide Valine Fufeng Others Others Evonik 2% 5% Meihua 17% 4% 3% 51% Starlake AJI 7% 61% 28%
AJI 22% 14 IV. BIO 3) Overseas Business 9 manufacturing facilities worldwide, in China, Indonesia, Brazil, Malaysia, US Global revenue accounts for 97% of total BIO revenue
AAs: Lysine, Valine, Arginine, US China Threonine, Tryptophan, (1) (3) Cysteine, Nucleotide AAs: Lysine
Malaysia AAs: Methionine (1) Brazil (2) Indonesia AAs: Lysine, Tryptophan, MSG, (2) Valine, Arginine, Nucleotide AAs: Lysine, SPC ’13 Sales W1.4tr ‘17 Sales W2.0tr Others 7% Brazil US US 5% 8% 10% China China EU 17% 29% EU 21% 39% Brazil Indonesia Indonesia 27% 18% 19%
* Overseas revenue excludes exports from Korea 15 IV. BIO 4) Key products Diversified portfolio with a balanced exposure in both HNH (Human Nutrition & Health) and ANH (Animal Nutrition & Health)
Launch Market size Type Amino acid Function CJCJ market status Date (K ton)
1963 MSG Dominant #1 player in Nucleotide MSG: 3,884 Flavor enhancement Nucleotide: 54 MSG 2% M/S 1977 Nucleotide Nucleotide 51% M/S
2013 Valine
Food 2013 Arginine Additive Valine: 20 Dominant #1 player in Valine Arginine: 10 2016 Cysteine Muscle metabolism, tissue repair Cysteine: 10 Valine: 61% M/S Cell division, wound healing Citrulline: 4 Arginine: 20% M/S 2016 Citrulline Detoxification for the skin Histidine: 3 Immune enhancement: Enhancement of calcium absorption 2016 Histidine
1991 Lysine Dominant #1 player in Tryptophan 2000 Threonine Lysine: 2,430 Feed Threonine: 547 Lysine 25% M/S Additive Tryptophan: 34 Threonine 5% M/S Limiting (essential) AA for pig/chicken 2009 Tryptophan Methionine: 1,216 Tryptophan 51% M/S Immune enhancement Methionine 8% M/S Promote muscle growth 2015 Methionine
16 V. Feed & Livestock 1) Overview Entered 6 countries including domestic market Aim to make the synergy effect through vertical integration
Annual sales and OPM Revenue breakdown
(Unit: W bn) Animal Feed Livestock
3% 2% 3% 3% Of total revenue W2.1tr (2017) 0% -1% 2013~2017 CAGR: 8% Livestock 28%
2,106 2,113 Animal Feed 2,013 72% 1,805 1,618 1,549 Revenue breakdown by region
4% 26% 18% 48% 96% 100% 100% 74% 82% 52%
2013 2014 2015 2016 2017 2017 Domestic Indonesia Vietnam China Philippines Cambodia
* Changes in accounting reflected from 2017, refer to P.25 17 V. Feed & Livestock 3) Overseas Business 24 feed manufacturing facilities in Indonesia, Vietnam, China, etcs Global revenue accounts for 70% of total Feed&Livestock revenue
’13 Sales W1.0tr ‘17 Sales W1.5tr
Philippines 7% Philippines 5% China 18% Cambodia 1% Indonesia China 16% Vietnam China 51% 24% (12) Vietnam Indonesia 54% 24%
Cambodia Vietnam (1) (4) Philippines (1)
Indonesia (6)
Animal Feed & Livestock Animal Feed
18 VI. 2018 Outlook by Division Food Division
Processed Food Foodstuff
Domestic Domestic - Domestic revenue to grow at mid/high single-digits thanks to - Overall revenue de-growth to slow down as downsizing new product launches of HMR and flagship products and of low-margin trading biz to gradually moderate, while maximizing Chuseok gift sales through product diversification overall sales volume to increase - Progressive earnings improvement expected as 1) price hike to - Continued, lower sugar and flour input price to lead to be gradually reflected and 2) promotion efficiency and 3) robust spreads (ASP-cost) streamlining operations to minimize cost burden from - Oil, starch input prices to gradually increase in 3Q but to agricultural price increase and minimum wage hike decline after 4Q onwards
Overseas Overseas - US: Revenue to increase 20%+ for the full year led by Costco - Vietnam flour/sugar mix biz reviewing capacity MVM event in 3Q and full-scale operation of new expansion (CAPEX W30bn) manufacturing facilities in New Jersey/ California : Flour capacity: 140K ton 280K ton - China: Resilient dumplings and tofu sales volume and new : Sugar mix: 40K ton new capacity product launches via online new channels expected - Limited impact on 2018 earnings as new capacity to - Vietnam: New product/channel expansion after completion of come online in May 2019, Vietnam biz to expand and Integrated Food Cluster in Oct 2018 growth to accelerate going forward - Russia: PMI process to continue
19 VI. 2018 Outlook by Division Bio Division Bio Feed & Livestock
Feed Additive Domestic - Lysine Sales volume allocation by region to maximize profit, - Focus on profitability by streamlining business structure China ASP to remain stable as China government’s enforced and increasing feed ASP, despite sales volume decline from environmental policies to result in lower run rates for local intensified competition and increase in raw material prices competitors despite capacity additions - Overall domestic revenue to gradually recover from - Tryptophan ASP to rebound from 4Q after reaching trough in expansion of partner farms and as impact from de- 3Q marketing of low-margin channels moderates - Methionine Regular maintenance shutdown in 3Q to increase fixed cost burden, while manufacturing cost per unit to Overseas stabilize from 4Q onwards from sales volume expansion and [Indonesia] adoption of new cost-saving process - Poultry price to remain robust thanks to Indonesia - Threonine Sales to reduce through production shift from government import restrictions on chicken raised for threonine to valine in China breeding despite cost burden from raw material price increase Food Additive - Build slaughterhouse and expand high-margin distribution - Nucleotide ASP/sales volume to increase thanks to rising channels to alleviate earning volatility from livestock prices China demand, especially from large-size customer, and [Vietnam] reviewing 6K ton capacity increase (currently running at full - Hog price to maintain at 40K VND level as Vietnam hog capacity of 36K ton) supply is expected to stale in 2H18 - Arginine Expand sales volume and strengthen market - 2H18 earnings to recover YoY thanks to strong hog price dominance through strategic pricing and lower base effect in 2H17 20 VI. 2018 Outlook by Division Key Strategies
Food Division BIO Division
Processed Food Bio - Domestic Enhance cost reduction across all value chain - Feed Additive : Lysine Reduce China exposure (20% 10%) (including purchasing, production, and logistics) in order to by expanding non-China sales volume and strengthen cope with changes in external environmental issues and to compatible production to respond flexible to market secure future growth, Establish and stabilize early conditions , Tryptophan/Methionine Reduce manufacturing production of Jincheon Smart Factory cost by optimizing manufacturing process and switching to (microwavable rice, cooked meat, frozen food additional low-cost raw materials, Threonine Reduce production capacity to come online in by Oct 2018) volume through compatible production into valine, Selecta - Overseas : US) Diversify product/channels through capacity Increased bulk sales volume expected as European salmon additions in East/West manufacturing facilities, China) enters peak season in 2H Expand dumpling sales volume and online channels, - Food Additive : Nucleotide Increase market dominance in Vietnam) Secure production capacity and maximize nucleotide by engaging in long-term contracts with large- synergies amongst 3 manufacturing companies, Russia) size customer, MSG Reduce production volume through Stabilize newly acquired entities compatible production into arginine and new promising items such a flavor materials Foodstuff - Domestic : Effective raw material purchasing in 2019 Feed & Livestock through in-depth analysis of grain market - Reduce business risks and maximize profits through value - Overseas: Strengthen milling/sugar mix business in Vietnam chain integration and expanding high-margin feed products and selective specialty business in developed countries - Improve cash flow and management system by applying ERP system to overseas business division to manage accounts receivable, loan, etc. 21 VII. Appendix 1) CJ Logistics Acquisition of CJ Logistics CJCJ’s stake in CJ Logistics increased from 20.1% to 40.2%
Resolve uncertainties stemming from policy change by simplifying CJ Logistics largest shareholder structure
Potential amendments to Fair Trade Act Impact on CJCJ
1 Strengthen ownership and resolve joint holding structure Additional stake in
- Enforced stake ownership of subsidiary & sub-subsidiary CJ Logistics needed From current 20% to 30% for listed co. From current 40% to 50% for unlisted co.
- Ban joint ownership of sub-subsidiary Resolve joint ownership structure 2 Status of Fair Trade Act amendment bill
- Currently under National Assembly review
22 VII. Appendix 2) CJ Healthcare Disposal of CJ Healthcare business
1) Improve financial structure - Repayment of maturing debt worth KRW440bn in Apr - To repay additional debt worth KRW200bn maturing in Sep 2) Funding for potential M&A
Details Deal Structure
- Disposal Date: April 18, 2018 - Disposal price: KRW1.31tn 100% stake of CJ Healthcare - Cash inflow: KRW1tn
CJCJ Kolmar Korea Post tax
1.31tn KRW - Disposal gain: KRW1tn CJ Healthcare book value KRW247.5bn - Others 100% CJ Healthcare Dividend income from CJ Healthcare (KRW121bn)
23 VII. Appendix 3) R&D Center Korea’s largest food R&D Center built in 2015 682 R&D staff covering both food and bio divisions
CJ Blossom Park Detail
Location GwangGyo, Suwon, Geyonggi-do
Land /building floor area 39,500 sqm / 111,057sqm
R&D Staff 682 (Ph D. 123, Masters 331)
24 VII. Appendix 4) Cost Reallocation HQ overhead costs reclassified reflecting the recent organizational changes ; HQ staff reallocated to each business unit Subtle overhead cost among business divisions became easier to track thanks to the recent ERP upgrade
⇒ Total revenue and profit unchanged, but slight changes by division
2017 earnings reallocation applied retroactively
Previous Current (Unit: W bn) 1Q17 2Q17 3Q17 4Q17 1Q17 2Q17 3Q17 4Q17 Sales 3,866.5 3,908.9 4,410.7 4,291.1 3,866.5 3,908.9 4,410.7 4,291.1 CJCJ Operating Profit 192.5 164.4 269.3 150.4 192.5 164.4 269.3 150.4 CJCJ Sales 2,276.5 2,195.3 2,539.3 2,360.4 2,276.5 2,195.3 2,539.3 2,360.4 (Excl. CJL/CJHC) Operating Profit 126.1 86.2 190.6 72.0 126.1 86.2 190.6 72.0 Sales 1,321.9 1,180.2 1,448.0 1,160.1 1,320.3 1,176.4 1,439.5 1,154.6 Food Processed Food 782.4 713.3 905.9 737.6 780.7 710.8 903.2 734.7 Division Foodstuff 539.5 466.9 542.1 422.5 539.6 465.6 536.3 419.9 Operating Profit 87.2 54.7 149.3 6.2 99.6 68.5 166.5 28.1 Sales 954.6 1,015.1 1,091.3 1,200.3 956.2 1,018.9 1,099.8 1,205.8 BIO 454.2 470.5 564.5 665.7 454.5 472.3 571.4 669.7 Bio Feed&Livestock 500.4 544.6 526.8 534.6 501.7 546.6 528.4 536.1 Division Operating Profit 38.9 31.5 41.3 65.8 26.5 17.7 24.1 43.9 BIO 37.6 32.4 42.5 67.9 29.9 24.0 30.5 52.2 Feed&Livestock 1.3 -0.9 -1.2 -2.1 -3.4 -6.3 -6.4 -8.3 *K-IFRS 1115 Revenue from Contracts with Customers not applied retroactively 25
2018 2Q Business Results
CJ CheilJedang IR
Aug 8th 2018
This material is based on non-audited financial statements for 2Q18 and released for investors’ convenience only. Please note that readers should be aware this material is subject to revision during the course of audit. Contents
Ⅰ. 2Q18 Results Highlights
- Quarterly results excluding CJ Logistics Pg. 29
Ⅱ. Earnings Analysis by Division
- Food Division Pg. 30
- Bio Division Pg. 31
- CJ Logistics Pg. 32
Ⅲ. Other Analysis
- SG&A Expense Pg. 33
- Non-Operating Income & Expense Pg. 34
V. Appendix
28 Ⅰ. 2Q18 Results Highlights Key Highlights Revenue up 2%1) YoY as Processed Food & Bio division continues robust sales growth, despite revenue decline from Foodstuff/ Feed & Livestock and CJ Healthcare divesture Operating profit up 26% YoY on the back of earnings growth of Bio’s major products and recovery in overseas livestock prices Net profit surged 4,114% YoY thanks to CJ Healthcare disposal gain
Sales Operating Profit Net Profit
(Unit: W bn) (Unit: W bn) (Unit: W bn)
+W40.5bn (+1.7% YoY) +W27.1bn (+26.0% YoY) +W744.7bn (+4,114.4% YoY)
Excl. +W172.2bn (+7.8% YoY) Excl.+W45.0bn (+52.2% YoY)
2,367.5 2,327.0 131.2 2,367.5 2,195.3 104.1 131.2 762.8 86.2 18.1
2Q17 2Q18 2Q17 2Q18 2Q17 2Q18
1) 3% growth excluding changes in accounting issue ※ Excluding CJ Logistics/ CJ Healthcare disposed as of April 18, 2018 29 Ⅱ. Earnings Analysis by Division Food Division Processed Food sales up 8% YoY thanks to robust sales of HMR & expansion of overseas biz Foodstuff revenue down 1% YoY owing to downsize of low-margin trading biz and sluggish ASP Operating profit similar to last year’s level hit by key raw material price increase from Processed Food
Sales and OPM trend Earnings analysis (Unit: W bn) Sales OPM • Sales 11.6% 8.9% - Processed Food sales up 8% YoY (W769.5bn) due to HMR 5.8% 2.4% 5.6% and overseas biz expansion whereas price hike impact remains slow ✓12% revenue growth excluding changes in accounting issues1). 1,439.5 1,229.2 ✓ Microwavable Rice/Kimchi sales:+20%/+38%, while processed meat 1,176.4 1,154.6 1,316.2 revenue slowed to low/mid single digit growth ✓ HMRsales +46% YoY thanks to new product launches in Side Dish categories & successful expansion of Soup/Stew categories ✓ Overseas sales +25% YoY mainly from China revenue expansion 2Q17 3Q17 4Q17 1Q18 2Q18 China sales +48% YoY thanks to dumpling sales expansion, Vietnam sales +52% YoY owing to K-Food Kimchi/Seaweed Crisp US sales growth slowed due to 1Q Costco MVM event “Key product M/S trend” “Processed Food - Foodstuff sales down 1% YoY (W459.7bn) due to downsize Global Revenue” of low-margin biz and ASP decline from drop in raw Microwavable Rice Dumpling Kimchi Soup (Excl. export) material cost, despite increase in sales volume 142 • Operating profit 66.5 78.1 73.5 75.8 113 - W68.6bn (Flat YoY) thanks to (Foodstuff) spread 96 improvement in sugar & oil products despite increasing 48.7 48.6 47.7 40.0 (Processed Food) agricultural (raw material) cost burden 43.8 46.7 44.4 ✓ 26.7 34.5 Rice/dried red pepper unit cost 40%/71% YoY 31.3 34.0 ✓ Maintained SG&A-to-sales ratio similar to 2Q17 by controlling 31.2 promotion level amid fierce competition environment 2016 2017 1Q18 2Q18 2Q16 2Q17 2Q18 ✓ Decline in raw sugar input price amid resilient sugar sales volume 1) K-IFRS 1115 Revenue from Contracts with Customers growth and improved oil spreads (ASP-cost) 30 Ⅱ. Earnings Analysis by Division Bio Division Bio sales up +30% YoY thanks to strengthened market dominance in nucleotide and tryptophan Overall BIO revenue up 12% YoY reflecting 4% decline in Feed & Livestock revenue Bio OP grew 87% YoY thanks to favorable nucleotide market conditions and increasing lysine ASP Feed & Livestock OP turned to black on the back of strong livestock price recovery Sales and OPM trend Earnings analysis (Unit: W bn) Sales OPM • Sales - Bio sales up 30% YoY( W614.1bn) thanks to ASP/volume 3.6% 5.5% 2.2% increase in nucleotide, tryptophan & major amino acids and 1.7% 3.9% 1,205.8 Selecta acquisition effect (excluding Selecta +13% YoY) ✓ Feed Additive: Tryptophan/valine robust revenue growth and 1,099.8 Selecta acquisition effect leads to overall sales growth of +33% YoY 1,018.9 1,081.4 1,138.3 ✓ Food Additive: Nucleotide major customer expansion and arginine sales volume increase leads to overall sales growth of 23% YoY - Feed & Livestock revenue down 4% YoY (W524.2bn) owing to domestic de-marketing of low-margin customers despite 2Q17 3Q17 4Q17 1Q18 2Q18 overseas livestock price recovery • Operating profit “Livestock price trend” - Bio: OP up 87% YoY (W44.9bn) thanks to lysine/methionine Vietnam Hog Price(Left) Indonesia Chicken Price(Right) ASP increase and increased contribution from nucleotide (K VND/Kg) (K IDP/Kg) ✓ Feed Additive: OP growth thanks to increase in tryptophan ASP/sales 50 20 volume and improving lysine ASP ✓ Food Additive: Resilient OP owing to strong China demand for nucleotide and arginine sales volume expansion 30 15 - Feed & Livestock: OP turned to black at W17.7bn thanks to strong Vietnam hog & Indonesia chicken price recovery despite cost burden from raw material price increase in domestic biz 10 10 ✓ Vietnam: 2Q hog price at 40K VND/kg (+43% QoQ, +101% YoY) 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 ✓ Indonesia: 2Q chicken price at 19K IDR/kg (+11% QoQ, 18% YoY) 31 Ⅱ. Earnings Analysis by Division CJ Logistics Revenue up 34% YoY thanks to overseas M&A acquisition effect, China business expansion, and increase in parcel volume, Delay in margin recovery owing to increase in minimum wage impacting CL/parcel cost burden and increased competition in W&D Sales and OPM trend Earnings analysis (Unit: W bn) Sales OPM • Sales 2.5% - Up +34% YoY (W2,284.6bn) thanks to solid growth from 2.3% 3.6% 3.3% 3.1% parcel and global division ✓ Parcel: continued robust growth from increasing new orders from 2,001.5 2,284.6 strengthened marketing dominance : Parcel volume +17.4% YoY, Record high M/S of 49.2% 1,934.4 1,707.8 1,873.2 ✓ Global: 20%+ resilient revenue growth thanks to China biz expansion (CJ Rokin) Darcl/ICM (3Q17~), Gemadept (Feb 2018) 2Q17 3Q17 4Q17 1Q18 2Q18 • Operating profit “Parcel volumes and MS continue to grow” - OP down 7.7% YoY (W57.1bn) due to minimum wage increase impacting CL and parcel OPEX (mn boxes) (%) 물동량Volume(좌) M/S(MS우) 110 50 ✓ Delayed recovery in shipping/port industry and increased competition in W&D segment ✓ Increase in COGS owing to increasing contract cost (minimum 90 45 wage increase) of CL/Parcel division ✓ PMI of newly added overseas M&A entities and parcel delivery network-related cost 70 40
50 35 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 32 Ⅲ. Other Analysis SG&A Expense SG&A-to-sales ratio down YoY owing to CJ Healthcare divesture, Adjusted SG&A-to-sales ratio similar to last year’s level excluding CJ Healthcare SG&A expenses
• Adjusted 2Q17 SG&A-to-sales ratio at 21.2% (Unit: W bn) (excluding CJ Healthcare biz) 2Q17 2Q18 증감 “SG&A to Sales Ratio Trend”
(Unit: W bn, %) Labor cost 144.4 137.8 -6.6
24.3% Commission 22.5% 22.9% expense 116.0 105.4 -10.6 21.6% 21.1% Transportation cost 99.6 115.1 15.5
Promotion cost 42.8 15.1 -27.7 577.6 602.5 575.6 523.1 500.1 Advertising cost 10.0 12.6 2.6
Others 110.3 114.1 3.8
2Q17 3Q17 4Q17 1Q18 2Q18 Total 523.1 500.1 -23.0
33 Ⅲ. Other Analysis Non-Operating Income & Expense Increase in non-operating gains by W961.7bn thanks to CJ Healthcare disposal gains
Details Key non-operating items (Unit: W bn)
2Q17 2Q18 YoY • Net interest expense at W36.1bn Net interest (-W8.0bn YoY) expense -28.1 -36.1 -8.0
FX-related gains&losses -3.8 -19.4 -15.6 • FX-related losses at W19.4bn (-W15.6bn YoY) Equity method 1.9 2.2 0.3 gains&losses - Translation gains&losses –W19.2bn Transaction gains&losses –W0.2bn Donation -11.6 -11.6 0 Commodity derivatives- • Commodity derivatives-related losses at related -19.4 -5.8 13.6 W5.8bn (+W13.6bn YoY) gains&losses Gain on sales of investment in 0 995.7 995.7 subsidiaries • Gain on sales of investment in subsidiaries Others -10.8 -35.1 -24.3
- Gain on sales of investment in CJ Healthcare W995.7bn (+W995.7bn YoY) Total -71.8 889.9 961.7
Tax -14.2 -258.3 -244.1
• 2Q18 USDKRW [Ending] : 1121.7, 2Q18 USDKRW [Avg] : 1078.6 ※ Non-operating items shown as (-) for expenses and (+) for income • 2017 USDKRW [Ending] : 1071.4, 2Q17 USDKRW [Avg] : 1129.4 34 Ⅳ. Appendix Financial Statement 1-(1). Summary of Income Statement (excluding CJ Logistics)
(Unit: W bn)
2Q17 1Q18 2Q18 YoY QoQ
Sales 2,327 2,512 2,368 41 1.7% -145 -5.8% COGS 1,700 1,766 1,736 36 2.1% -30 -1.7% (%) 73.0% 70.3% 73.3% 0.3%pt. 3.0%pt. Gross Profit 627 746 631 4 0.7% -115 -15.4% (%) 27.0% 29.7% 26.7% -0.3%pt. -3.0%pt. SG&A 523 576 500 -23 -4.4% -76 -13.1% (%) 22.5% 22.9% 21.1% -1.4%pt. -1.8%pt. Operating Profit 104 171 131 27 26.0% -40 -23.1% (%) 4.5% 6.8% 5.5% 1.0%pt. -1.3%pt. Non-Operating P/L -72 -42 890 962 흑전 932 흑전 (%) -3.1% -1.7% 37.6% 40.7%pt. 39.3%pt. Recurring Profit 32 129 1,021 989 3061.3% 892 693.4% (%) 1.4% 5.1% 43.1% 41.7%pt. 38.0%pt. Net Profit 18 96 763 745 4114.4% 667 697.1% (%) 0.8% 3.8% 32.2% 31.4%pt. 28.4%pt.
35 Ⅳ. Appendix Financial Statement 1-(2). Summary of Balance Sheet (excluding CJ Logistics)
(Unit: W bn)
2013 2014 2015 2016 2017 2Q18
Current Assets 2,434.7 2,769.7 2,860.5 3,464.0 3,267.9 4,234.9 Quick Assets 1,442.6 1,713.1 1,774.6 2,199.5 1,980.9 2,728.4 Inventory 992.1 1,056.6 1,085.9 1,264.5 1,287.0 1,506.5 Non-Current Assets 6,489.1 6,613.1 6,953.1 7,309.9 7,861.8 8,813.8 Investments 1,629.6 1,604.0 1,611.6 1,489.0 1,181.0 1,895.3 Tangible Assets 4,367.1 4,528.8 4,859.4 5,210.2 5,717.4 6,000.5 Intangible Assets 426.1 426.7 439.3 561.4 913.7 875.3 Other Fixed Assets 66.3 53.6 42.8 49.3 49.7 42.7 Total Assets 8,923.8 9,382.8 9,813.6 10,773.9 11,129.7 13,048.7 Current Liabilities 2,800.5 3,316.0 3,130.4 3,429.8 3,714.1 4,198.7 Non-Current Liabilities 2,885.7 2,725.1 2,987.7 3,351.0 3,345.1 3,287.7 Total Debt 4,125.9 4,356.1 4,277.6 4,801.5 4,894.8 5,180.4 Net Debt 3,716.2 3,903.9 3,705.4 4,133.0 4,379.8 4,094.6 Liability to Equity Ratio 176.0% 181.0% 166.0% 170.0% 173.0% 135.2% Net Liability to Equity Ratio 163.0% 167.0% 150.0% 153.0% 161.0% 115.7% Net Debt to Equity Ratio 115.0% 117.0% 100.0% 104.0% 108.0% 74.3% Total Liabilities 5,686.2 6,041.1 6,118.1 6,780.8 7,059.2 7,486.4 Current Capital 72.1 72.3 72.4 72.4 72.5 81.9 Capital Surplus 895.9 910.2 918.3 919.9 925.1 1,540.8 Other Accumulated Earnings -153.6 -110.9 -116.6 -79.9 -472.0 -400.4 Retained Earnings 2,160.5 2,191.6 2,331.0 2,561.5 2,895.6 3,688.0 Minority Interest 262.7 278.5 490.4 519.2 649.3 652.0 Total Shareholders’ Equity 3,237.6 3,341.7 3,695.5 3,993.1 4,070.5 5,562.3 36 Ⅳ. Appendix Financial Statement 2-(1). Summary of Income Statement (including CJ Logistics)
(Unit: W bn)
2Q17 1Q18 2Q18 YoY QoQ
Sales 3,909 4,349 4,454 545 13.9% 105 2.4% COGS 3,096 3,431 3,620 525 16.9% 189 5.5% (%) 79.2% 78.9% 81.3% 2.1%pt. 2.4%pt. Gross Profit 813 917 834 20 2.5% -84 -9.1% (%) 20.8% 21.1% 18.7% -2.1%pt. -2.4%pt. SG&A 649 707 649 0 0% -58 -8.2% (%) 16.6% 16.3% 14.6% -2.0%pt. -1.7%pt. Operating Profit 164 210 185 20 12.3% -26 -12.2% (%) 4.2% 4.8% 4.1% -0.1%pt. -0.7%pt. Non-Operating P/L -94.2 -98.1 864 958 흑전 962 흑전 (%) -2.4% -2.3% 19.4% 21.8%pt. 21.7%pt. Recurring Profit 70.2 112 1,048 978 1393.2% 936 834.4% (%) 1.8% 2.6% 23.5% 21.7%pt. 20.9%pt. Net Profit 43.1 72.1 783 740 1715.6% 711 985.8% (%) 1.1% 1.7% 17.6% 16.5%pt. 15.9%pt.
37 Ⅳ. Appendix Financial Statement 2-(2). Summary of Balance Sheet (including CJ Logistics)
(Unit: W bn)
2013 2014 2015 2016 2017 2Q18
Current Assets 3,705.0 3,973.3 4,018.5 4,880.7 4,963.5 6,104.4 Quick Assets 2,698.3 2,907.7 2,920.9 3,600.5 3,660.0 4,571.2 Inventory 1,006.7 1,065.6 1,097.6 1,280.2 1,303.5 1,533.2 Non-Current Assets 9,299.5 9,409.2 9,732.8 10,885.5 11,904.7 12,954.8 Investments 1,062.9 1,087.6 1,135.8 1,096.2 716.1 819.3 Tangible Assets 6,254.5 6,383.9 6,690.2 7,280.5 8,179.4 9,112.0 Intangible Assets 1,764.0 1,750.9 1,737.3 2,333.8 2,758.1 2,777.6 Other Fixed Assets 218.1 186.8 169.5 175.0 251.1 245.9 Total Assets 13,004.5 13,382.5 13,751.3 15,766.2 16,868.2 19,059.2 Current Liabilities 3,708.9 4,122.4 4,335.7 4,699.2 5,496.9 6,035.1 Non-Current Liabilities 4,483.0 4,310.2 4,030.4 5,006.5 5,227.4 5,787.8 Total Debt 5,772.0 5,857.4 5,670.7 6,563.2 7,087.4 7,827.3 Net Debt 5,242.5 5,269.5 4,975.5 5,739.2 6,396.9 6,534.1 Liability to Equity Ratio 170.0% 170.0% 155.0% 160.0% 175.0% 163.8% Net Liability to Equity Ratio 159.0% 158.0% 142.0% 147.0% 163.0% 146.0% Net Debt to Equity Ratio 109.0% 106.0% 92.0% 95.0% 104.0% 90.8% Total Liabilities 8,191.9 8,432.6 8,366.1 9,705.7 10,724.3 11,822.9 Current Capital 72.1 72.3 72.4 72.4 72.5 81.9 Capital Surplus 895.9 910.2 918.3 919.9 925.1 1,540.8 Other Accumulated Earnings -227.3 -184.8 -181.9 -149.4 -526.1 -456.6 Retained Earnings 2,143.1 2,187.2 2,334.2 2,566.5 2,903.5 3,675.6 Minority Interest 1,928.8 1,965.0 2,242.2 2,651.1 2,768.9 2,394.6 Total Shareholders’Equity 4,812.6 4,949.9 5,385.2 6,060.5 6,143.9 7,236.3 38 Ⅳ. Appendix Earnings by Division (excluding CJ Logistics) 3. Earnings results by division
(Unit: W bn)
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 YoY
CJCJ Sales 2,399.5 2,327.0 2,674.6 2,484.1 2,512.2 2,367.5 1.7% Gross Profit 685.7 627.2 787.8 700.3 746.3 631.3 0.7% Exl. CJL Operating Profit 144.2 104.1 210.2 97.8 170.7 131.2 26.0% Inc. CJHC EBITDA 239.5 196.8 313.3 196.7 275.6 234.2 19.0% Sales 1,320.3 1,176.4 1,439.5 1,154.6 1,316.2 1,229.2 4.5% Food Gross Profit 423.8 371.3 501.6 370.2 430.4 365.9 -1.5% Div. Operating Profit 99.6 68.5 166.5 28.1 116.8 68.6 0.1% EBITDA 146.8 112.6 219.5 76.2 166.2 117.3 4.2% Sales 956.2 1,018.9 1,099.8 1,205.8 1,081.4 1,138.3 11.7% Gross Profit 191.3 181.2 209.9 264.8 253.0 265.4 46.5% Operating Profit 26.5 17.7 24.1 43.9 41.9 62.6 253.7% EBITDA 70.1 61.5 69.6 89.6 92.6 116.9 90.1% Sales 454.5 472.3 571.4 669.7 592.0 614.1 30.0% Bio B Gross Profit 135.4 125.9 152.1 200.2 196.0 181.8 44.4% Div. I O Operating Profit 29.9 24.0 30.5 52.2 48.4 44.9 87.1% EBITDA 65.4 59.2 67.6 88.3 86.8 84.0 41.9% Feed Sales 501.7 546.6 528.4 536.1 489.4 524.2 -4.1% & Gross Profit 55.9 55.3 57.8 64.6 57.0 83.6 51.2% Lives Operating Profit -3.4 -6.3 -6.4 -8.3 -6.5 17.7 흑전 tock EBITDA 4.7 2.3 2.0 1.3 5.8 32.9 1330.4% Sales 123.0 131.7 135.3 123.7 114.6 Gross Profit 70.6 74.7 76.3 65.3 62.9 CJHC Operating Profit 18.1 17.9 19.6 25.8 12.0 EBITDA 22.6 22.7 24.2 30.9 16.8 ※ Above earnings by division reflects the changes due to organization changes 39 Investor Relations Tel: +82-2-6740-2955, 3146, 3150 E-mail: [email protected] www.cj.co.kr