Taking a New Leap
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Taking a New Leap ANNUAL REPORT 2015 01 ANNUAL REPORT 2015 CONTENTS INTRODUCTION 03 Corporate Profile 04 Message from the CEO 06 Financial Highlights 08 Vision 2025 09 Nongshim Way Towards another milestone 10 Taking a New Leap for the global No. 1 REVIEW OF OPERATIONS Over the past 50 years, Nongshim has been at the forefront 18 Instant Noodles of introducing Korean foods and culture to the world, with 22 Snacks an enduring dedication to delivering quality products and 24 Beverages undertaking wise investments. 26 Others Nongshim, which captivated the tastes of people around the world when it launched Shin Ramyun, has expanded NONGSHIM'S COMPETITIVENESS its global presence into over 100 countries, earning a reputation as a global top food company. One of Nongshim’s 30 Excellent R&D Capability most loved instant noodle brands Shin Ramyun is enjoyed 32 Efficient Purchase from Jungfraujoch, the crown of Europe, to Punta Arenas, 34 Cutting-edge Production System the southernmost city on the planet. 36 Advanced Logistics System Having emerged as the No. 1 global food brand, Nongshim is now entering the bottled water market by identifying GLOBAL BUSINESS a new growth engine for the next century. Nongshim promises to set yet another milestone as it opens a new 40 United States chapter in its noodle history with Baeksan Mountain Water, 42 China which is produced with the freshest mineral water of Mt. 44 Japan Baekdu. 46 Australia & Other Regions Nongshim will rise as a globally recognized food brand to spread healthy food culture under the vision of contributing FINANCIAL REVIEW & OTHERS to the happiness of humanity. 49 Management's Discussion & Analysis 52 Consolidated Financial Statements 56 Non-consolidated Financial Statements 60 Affiliates 61 Holding Co. & Investment Structure 62 Overseas Plants 64 Global Network 02 ANNUAL REPORT 2015 Message From The CEO Dear valued customers and shareholders, Third, we will overhaul Noksan factory and the vacuum chip line. Thank you for your kind support and interests towards Nongshim We will concentrate on company-wide resources for strengthening throughout 2015. In 2015, Nongshim saw its sales rise of 4.3 percent marketing strategies and R&D to enhance the non-fried noodle line at year-on-year to KRW 1.88 trillion and a net income increase of 69.1 Noksan factory and the vacuum chip line at Asan factory. percent to KRW 115.2 billion, mainly fueled by the growth of noodle products and Baeksan Mountain Water, two of its mainstay businesses. Fourth, we will create a global production system. We take great pride in presenting to you our improved management This year, we aim to turn facilities in Korea and China into one of the performance over the last year. world’s top factories by undertaking an extensive upgrade. Nongshim promises to sustain a steady growth in sales throughout this Fifth, Nongshim will diversify distribution channel to increase year, both in its mainstay and overseas business. sales. By proactively responding to the fast-changing distribution environment However, there are many management challenges both at home and and implementing channel-specific strategies, we will improve sales, abroad. The US economy is anticipated to slow down, while the sluggish profit, and market share. Chinese market and the sharp drop in energy prices are adding to the feelings of uncertainty in the international economic environment. Sixth, we will establish responsibility management system. The company will enact a clear set of standards and goals to realize the First and foremost, aging population and prolonged low growth are responsibility management for task implementation. Moreover, to ensure sapping the households’ residual income and market, which make that responsibility management takes a firm root in our increasingly companies struggle with low profit. These trends are likely to aggravate expanding overseas business, we will take production facilities, quality, the prolonged conditions in 2016. and information systems to the global level. In addition to that, risks, such as regulations on the retail market, Nongshim pledges to stay committed to completing those tasks as food safety issues, or business ethics, will most likely become critical we strive to deliver higher values to our shareholders in 2016. Your management concerns for the coming year. unwavering support and encouragement would be deeply appreciated. In the face of challenging management conditions, Nongshim has set Last year, we celebrated our 50th anniversary of the foundation. We forth the 2016 management vision “Reach the Goal” to achieve sustainable are feeling great pride for our past 50 years and also a grave sense of growth amid the slowing economy. To this end, Nongshim pledges to responsibility for the upcoming 50 years, Nongshim has set forth its Vision undertake the tasks aimed at increasing sales and securing reasonable 2025. We pledge to spare no effort to emerge as the top food company in profits as follows: Korea and beyond. First, we will strive to secure an exclusive competitive edge Once again, I express my deepest gratitude for your interest and support for flagship brands. and wish you lasting prosperity and good luck. To do so, we will establish key products including the 辛 (Shin) and Shrimp Crackers as premium brands while securing exclusive competitiveness and enhanced differentiation. CEO Joon Park Second, Nongshim pledges to establish Baeksan Mountain Water as the No. 1 brand. Last year, Nongshim invested a total of KRW 200 billion to build the new Baeksan Mountain Water factory. With the dramatically increased production capability and the on and offline sales channel expansion, we expect Baeksan Mountain Water to rise as a premium bottled water brand in both Korea and China. 04 05 ANNUAL REPORT 2015 Financial Highlights Operating Performance (Unit: KRW in billions) Sales Breakdown in 2015 (Unit: KRW in billions, %) 2013 2014 2015 Sales* 1,870.8 1,801.3 1,878.7 Others Instant noodles 1,322.8 1,230.5 1,260.5 340.8 Snacks 290.9 307.6 311.7 16.9% Beverages 91.5 89.0 103.5 Others 295.8 307.0 340.8 Beverages Gross profit 513.4 496.7 547.7 103.5 5.1% Operating profit 92.1 70.9 105.3 Instant noodles Net income 92.6 68.1 115.2 1,260.5 62.5% * Excluding sales allowances (gross sales for each business division) Snacks 311.7 Financial Status and Ratio (Unit: KRW in billions) 15.5% 2013 2014 2015 Total assets 2,129.9 2,116.8 2,257.5 Total liabilities 622.7 575.2 628.0 Total shareholders’ equity 1,507.2 1,541.6 1,629.5 Debt-to-equity (%) 41.3 37.3 38.5 Price-dividend yield (%) 1.7 1.6 0.9 Sales (KRW in billions) Operating Profit (KRW in billions) Sales of Overseas Subsidiaries (Unit: USD in millions) 1,878.7 1,870.8 105.3 409.5 1,801.3 92.1 356.8 70.9 303.5 295.9 280.2 2011 2012 2013 2014 2015 2013 2014 2015 2013 2014 2015 * Sum of each overseas local subsidiary 06 07 ANNUAL REPORT 2015 Vision 2025 Nongshim Way In celebration of the 50th anniversary of foundation in 2015, Nongshim has announced VISION 2025, which aims Nongshim has re-established the Nongshim Way, the guiding principle to carry on the company’s 50-year- to overcome current difficulties and embrace the next 50 years. Highlighting enhanced customer values, and old success recipe and draw on our employee’s creativity and ideas. Based on the three pillars of Nongshim's health and happiness for humanity, VISION 2025 prepares for the future and dreams of Nongshim that is shared philosophy, the Nongshim Way will serve as the standard for Nongshim employees to follow. among its employees as we aspire to create a new food culture while delivering healthy products to the global market. Find and achieve valuable matters through relentless research and new thinking [Creativity & Professionalism] VISION 2025 Delivering Happiness to Core Values Humanity through Appreciate the results of Go toward a better future Healthy Foods working hard according through continuous to the provision of nature challenges and growth [Honesty, Faithfulness, [Challenge & and share those with & Cooperation] Passion] communities 1. Provide products and services that 5. Learn knowledge and technologies to Sales: KRW7trillion Pre-tax income margin:10% Percentage of global business: 40% customers can trust become an expert in one's field 2. Create new jobs with open thinking and creative ideas 6. Continuously improve oneself without Code of Conduct being complacent Lead & Grow with Connection 3. Be not afraid to fail, build and achieve proactive targets 4. Actively perform the works assigned 7. Proactively communicate and cooperate with responsibility based on mutual respect Customer Value Choice & Concentration Core Competency (Lead) (Grow) Enhancement (Connection) Strengthen market dominance Focus on China/America Belt Secure future core technologies Create new demands Enhance global brand power Build distribution infrastructure Innovate business model Operate global network Fortify customer relations 08 09 ANNUAL REPORT 2015 創 造 From Shin Ramyun to Shrimp Crackers, Nongshim has been the pioneer of a food culture with creative products and differentiated technology. The 50 years of Nongshim’s history itself represents Korea’s ramyun history. Nongshim always refuses to remain a latecomer. Instead, we chose to develop new products with industry-leading technology while strengthening our foothold in the food production business. This pioneering spirit is at the very foundation of our technological competitiveness. From Bowl Noodle Soup, which ushered the cup noodle culture in Korea, to Ansungtangmyun, produced in soup-specializing facilities, to Shin Ramyun, which captivates the taste buds of consumers worldwide with its spicy flavor, to Korea's best snack Shrimp Crackers, Nongshim has always striven to explore new markets.