June 2009June 2009

HiteHite--JinroJinro Investor PresentationInvestor Presentation

’09 1Q result of Hite Brewery

3

201,754

(22,587)

962,949

(106,600)

213,133

(23,635)

1,026,753

(110,241)

230,106

(23,635)

2007 1Q 2007 2008 1Q 2008 2009 1Q

Sales Volume

Trend in sales growth

� 2009 1Q sales +8.0% y-y

� Reason for sales increase

① Sales volume increased by 0.8% y-y

② 5.6% price hike in July ’08 reflected

③ Export sales volume increased by 62.8%,

export sales increased by 130.8% y-y

④ Other factors

- warmer temperature

- move narrowly because of economy

stagnation

Unit : Mn K.won / thousand Cs

(+7.8%)(+6.6%)

(+8.0%)

(+0.8%)

(+3.7%)(+4.9%)

(+5.6%)

(+3.8%)

(+4.1%)

(+3.3%)

4

Cost Breakdown

Malt, 27.8%

Cornstarch,7.3%

Other raw

material, 2.1%

Packaging,23.3%

Labor, 8.6%

Depreciation,13.9%

Others, 17.0%

진행일정� Gross profit W116.3bn (+1.9% y-y, gross profit margin 50.6% → -3.0%p y-y)

� Margin pressure by increased unit price of raw material

→ imported malt, cornstarch and packaging price increased, weaker K.Won effect maintains

� Malt

- Quantity consumed : domestic 5,832ton (18.9%),

imported 24,966ton (81.1%)

- Out of total malt cost of W31.4bn

domestic W9.1bn(29%), imported W22.3bn(71%)

→ domestic decreased W1.9bn, imported increased W6.0bn

Total increased W4.1bn (compared to sales 1.8%)

� Starch

- Quantity consumed : 11,667ton /

Cost : W8.3bn (increased W2.6bn y-y)

� Packaging

- Cost : increased W2.2bn

�Weaker K.Won

- ’08 1Q average FX W957 → ’09 1Q average FX W1,418

- import tariff : ’07 10% → ’08 0% → ’09 8%(2H 15%)

COGS breakdown

$497 / ton$600 / ton$498 / tonImported malt

’09 Mar~’10 Feb(E)’08 Apr~’09 Feb ’08 Jan~’08 MarItem

(’08 23.4%)

(’08 6.6%)

(’08 1.8%)

(’08 26.2%)

(’08 9.0%)

(’08 12.9%)

(’08 20.1%)

5

599.2

781.3

688.7

544.5552.7

596.7

820.5 834.2

781.3

492.5

513.0544.7

271 271

498498

600 600

497 497

0

100

200

300

400

500

600

700

800

900

07'1 07'2 07'3 07'4 07'5 07'6 07'7 07'8 07'9 07'10 07'11 07'12 08'1 08'2 08'3 08'4 08'5 08'6 08'7 08'8 08'9 08'10 08'11 08'12 09'1 09'2 09'3 09'4 09'5 09'6

International malt price

Hite imported malt price

진행일정

Cost fluctuation of malt

� Domestic malt price decreased 4%, imported malt average unit cost ’08 $587 → ’09 $513 (12% decreased)

� FX increased 17% y-y, if ’09 average FX is 1,300 won. Import tariff 8% resurrected (expected 15% in 2H)

� Malt cost will be increased 10bn won(9%) y-y, starch 4.5bn(14%) and packaging 3.2bn won(3%) y-y

will be reduced

Unit : dollar/ton

Input period

(’06 Autumn

contract)

Input period Contract period

($497 / ton)

Contract

period

Verbal

contract

($600 / ton)

Input period

6

Operating profit and marketing strategy

47,255

230,703

47,466

215,772

48,802

234,469

2007 2008 2009(E)

1Q Full year

� Operating profit : W48.8bn (+2.8% y-y, operating profit margin 21.2% → -1.1%p y-y)

� Royalty cost : W2.7bn (payment start from ’08 3Q)

� Marketing cost : 9.6% of sales (decreased W4.2bn, -2.7%p y-y)

Unit : Mn K.won

+0.4% +2.8%

-6.5% +8.7%

201.8bn

962.9bn

213.1bn

1,026.8bn

230.1bn

23.5bn 119.3bn

26.2bn 114.3bn

22.0bn

12.3%

11.1%12.4%11.6%

9.6%

0

2,000

4,000

6,000

8,000

10,000

12,000

2007 1Q 2007 2008 1Q 2008 2009 1Q

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

Sales Marketing cost of sales (%)

7

25,240

136,851

28,842

157,535

29,119

147,065

2007 2008 2009(E)

1Q Full year

진행일정

Earnings improvement

� Net profit : +1.0% y-y

� Equity method gain included to Hite Holdings, interest expense increased

� Subsidiary’s equity method gain excluded

2008 1Q equity method gain : 5.5bn(Hite Brewery)

2009 1Q equity method gain : 5.3bn(Hite Holdings)

※ Since 2008 3Q, included to Hite Holdings

� Interest expense increased

End of ‘08 1Q Interest bearing debt : W1,120bn

Interest expense : W13.5bn

End of ‘09 1Q Interest bearing debt W1,070bn

Interest expense : W14.5bn

※ Interest expense of Hite Holdings excluded in

’09 result.

- After de-merger : Hite Brewery – W860bn

Hite Holdings – W290bn

Unit : Mn K.won

+1.0%+14.3%

+15.1%-6.6%

8

Hite Brewery financial statement

Income statement

9

Hite Brewery financial statement

Cash flow statementBalance sheet

’09 1Q result of Jinro

11

165,170

(13,427)

669,428

(54,943)

171,589

(13,944)

735,259

(59,733)

160,447

(12,149)

2007 1Q 2007 2008 1Q 2008 2009 1Q

Sales Volume

Sales growth trend

� Sales decreased 6.5%

� 1Q sales decreased 6.5%

- Sales volume decreased 12.9%

(Whole market decreased 6.8%)

- Price hike of 5.9% in end of Dec 2008

� Reason for sales decrease in 1Q

- Pre-demand before price hike in Dec ‘08

(+35% in Dec ‘08)

- Price hike of other player in Jan ’09,

pre-demand of others occurred in Jan

Unit : Mn K.won / thousand Cs

(-4.5%)

(+9.8%)

(+3.8%)

(+3.9%)

(-6.5%)

(-12.9%)(-3.1%)

(-4.7%)

(-4.2%)(+8.7%)

12

Other raw

material, 3.9%

Packaging,

15.7%

Labor, 10.0%

Others, 21.8%Pure alcohol,

48.9%

Cost Breakdown

� Pure alcohol represent 48.9% of COGS

(28.9% of sales)

� Pure alcohol price hike of 3.5% in ‘07

Pure alcohol price hike of 11.5% in ’08

(Cost will be increased 25bn won y-y)

� Raw material of pure alcohol : sweet potato,

government-stock rice, tapioca, corn, etc

� Pipeline of pure alcohol

Pure alcohol company(10) → Korea Ethanol

Supplies Company → Soju company(10)

� Jinro is largely getting the pure alcohol from

Jinro Distillers close to the Icheon factoryCOGS Breakdown

� Gross profit W72.1bn (Gross profit margin 44.9%)

� Gross profit margin decreased 0.9%p because of decreased in sales volume and cost burden

(’08 49.3%)

(’08 3.6%)

(’08 15.6%)

(’08 11.2%)

(’08 20.3%)

13

Competition and marketing strategy

32,690

138,096

40,661

144,828

26,327

175,422

2007 2008 2009(E)

1Q Full year

� Operating profit : -35.3% y-y (Operating profit margin 16.4%)

� Market Share : 47.9% (Pre-demand difference between price hike period)

� Marketing expense : 8.6% of sales (Because of promotion event and renewal of “J”)

Unit : Mn K.won

-35.3%+24.4%

+4.9%

+21,1

171.5bn

669.4bn

157.5bn

735.3bn

160.4bn

10.4bn 40.6bn

10.7bn 52.6bn

13.8bn

8.6%

6.8% 6.1%7.1%

6.1%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2007 1Q 2007 2008 1Q 2008 2009 1Q

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Sales Marketing cost of sales (%)

14

23,163

150,711

33,895

154,803

26,422

166,822

2007 2008 2009(E)

1Q Full year

진행일정

Earnings reduction

� Net profit -22.0% y-y

� Sales and operating profit reduced, because of volume decreased

(Difference gap has lowered by interest expenses.)

� Operating profit : decreased W14.3bn

� Interest expense decreased W2.3bn

End of 2007 Interest bearing debt : W450bn

End of 2008 interest bearing debt : W380bn

End of 1Q 2009 interest bearing debt : W400bn

� No corporate tax through 2011

Unit : Mn K.won

+29.6% -22.0%

+4.9%+7.8%

15

Jinro financial statement

Income statement

16

Jinro financial statement

Cash flow statementBalance sheet

AppendixAppendix

18

진행일정

Equity status of Hite Brewery, Jinro

Foreign Investors,

22.13%

Capital Group,

6.05%

Lazard Asset

Management,

13.57%

KTCU, 9.43%

Hite Foundation for

Arts and Culture,

3.00%

Hite Holdings,

6.75%

Samjin Invest,

9.80%

Mr. Park and

Family, 16.73%

Related parties,

3.76%

Others, 8.78%

� Number of total shares : 9,936,853 shares

(common 9,563,918 / preferred 372,935)

� Major shareholder & friendly shares 40.07%

� Hite Holdings owns 6.75%

� Lazard Asset Management owns 13.57%

� Capital Group International owns 6.05%

Hite Brewery Jinro

� Number of total shares : 43,000,000 shares

(common 42,995,303 / preferred 4,697)

�Hite Holdings owns 55.40%

�Result of Put option event in 2009 2Q, equity

rate augmented from 49.74% to 64.94%(15.2%)

�Result of disposal and early put option event

in 2009 2Q, equity rate decreased from 64.94%

to 55.40%(-9.54%)

Military

pens ion,

13.15%

Hite

Holdings,

55.40%

Real D.W,

10.27%

Credit

union,

2.56%

Others,

0.20%

KTCU,

18.40%

19

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Growth Potential

BeerBeer SojuSoju

HITE 10yrs CAGR : 5.1%

BEER 10yrs CAGR : 2.5%

JINRO 10yrs CAGR : 4.8%

SOJU 10yrs CAGR : 2.3%Unit : C/S Unit : C/S

•Based on delivery numbers from Korea Alcohol & Liquor Industry Association andHite / Jinro sales volume(domestic)

� In whole liquor market, Beer and Soju are occupying 60% and 30% each.(National Tax office on May 2009)

� CAGR of Beer and Soju is about 2.5%.

20

Trend of Liquor market

� Annual consumption per adult

Beer : 2007 106.8 bottle → 2008 109.8 bottle, Soju : 2007 72.0 bottle → 2008 74.4 bottle

� Beer, soju, rice wine lead the liquor market, consumption of whisky & wine decreased because of FX, etc.

Consumption trend of main liquor(Consumption trend of main liquor(’’04 ~ 04 ~ ’’08)08) Export trend of main liquor(Export trend of main liquor(’’04 ~ 04 ~ ’’08)08)

* National tax office(2009. 5. 19)

‘04 ‘05 ‘06 ‘07 ‘08 ‘04 ‘05 ‘06 ‘07 ‘08

Total Soju Beer Rice wine

Whisky (thousand kl)

Total

Soju

Beer

Rice wine

Traditional

Hite HoldingsHite Holdings

22

진행일정

Equity status of Hite Holdings

� Number of total shares : 12,298,852 shares

(common 11,828,042 / preference 470,810)

�Treasury stock 12.86%

�KTCU owns 9.80%, Samjin invest owns 9.81%

�Foreign investor 15.72%

(Lazard Asset Management own less than 5%,

when they announced in Nov 2008)

� Major shareholder & friendly shares (include treasury stock) : 47.63%

� Shareholder with more than 5% : Samjin invest 9.81%, KTCU 9.8%

Equity status (common shares)

Foreign

Investors,

15.51%

Mr. Park and

Family , 16.74%

KTCU,

9.80%

Others, 28.66%

Hite Foundation

for Arts and

Culture, 3.00%

Samjin Invest,

9.81%

Related

parties,

5.16%

Treasury ,

12.86%

23

Hite Holdings structure after de-merger

Organization chart (End of June)

Hite Holdings

Jinro Hite Alcohol Hite Industry Hite DistillersHite Brewery

Kangwon /

Cheonju /

Suyang /

Logistics

Jinro Soju Jinro JapanForeign

Subsidiaries

Seoksu &

Puris

100%

100% 100% 82~100%

100%

55.40% 100% 100% 100%6.76%

-0.1NP

0.2OP

63.8Revenue

0.1NP

0.4OP

9.8Revenue

2.0NP

2.6OP

23.2Revenue

2.9NP

5.3OP

20.2Revenue

-2.9NP

-4.4OP

63.8Revenue

Hite Development

100%

* 2008 financial figures (before audit), Unit : KW bn

24

Hite Holdings financial statement

Balance sheet Income statement

25

Hite Holdings financial statement

Cash flow statement