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Lipstick wars: LG Household beats AmorePacific for first time

Diversified product range helped company weather China risk

SEOUL -- LG Household & Health Care outperformed its bigger rival AmorePacific Group in the second quarter thanks to its diversified product portfolio which helped the cosmetics company weather political risks stemming from conflict between South Korea and China.

LG Household posted 1.5 trillion won ($1.3 billion) in revenue in the April-June period, down 1.5% from a year ago. Its operating profit increased 3.1% to 232.5 billion won in the same period. Net profit reached 168.3 billion won, up 5.6%.

The company performed significantly better than AmorePacific Group which was hit seriously by a decline in Chinese tourists, key customers of its duty-free shops. The Chinese government had banned group tours from visiting South Korea since March 15 as part of its retaliation against Seoul over the deployment of a U.S. anti-missile defense system called Terminal High Altitude Area Defense, or THAAD, in Seongju.

AmorePacific Group said its revenue fell 17.8% to 1.4 trillion won in the second quarter year-on-year. Its operating profit tumbled 57.9% to 130.4 billion in the same period. Net profit plunged 59.5% to 100 billion won.

It is the first time that LG Household posted better earnings than AmorePacific Group. Last year, LG Household's revenue reached 6 trillion won compared with the 6.6 trillion won marked by AmorePacific Group. LG Household's net profit was 57.9 billion won while AmorePacific earned 81.2 billion won.

Analysts attributed this to LG Household's wide product range that includes cosmetics, detergents and beverages while more than 90% of AmorePacific's revenues come solely from cosmetics.

"LG Household & Health Care's diversified portfolio helped the company post stable profits amid prolonged uncertainties from outside factors," said Hahm Seung-hee, an analyst at Mirae Asset Daewoo, a brokerage house. "The company also enjoys improving growth and profitability in beverage and household goods business."

Sales in the company's beverage sector rose 4.3% to 375.7 billion won in the April-to-June quarter year-on-year while operating profit jumped 28.1% to 45.1 billion during the same period. The company, a local bottling partner of Coca-Cola, said that sales of Coca-Cola and Sprite continued to rise while its sparkling water Seagram's and juice brands also increased considerably.

LG Household shares fell 1% to 991,000 won on Monday, after rising 7.1% for six consecutive days since July 24. AmorePacific Group stocks fell 3.19% to 121,500 won, down five days in a row. The benchmark KOSPI edged up 0.07% to 2,402.71.

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