LG 2000 Annual Report Download - page 41

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From its operating activities in 2000, LGE had cash and cash equivalent in the amount of
W925 billion. This was then utilized for investment (W229 billion) and financial activities
(W612 billion). During the year, LGE expended a total of W1,585 billion for facilities
investment and R&D, a significant increase from W954 billion in 1999. Cash and cash
equivalents rose from W86 billion in 1999 to W171 billion in 2000, and will improve
even more in 2001 with cash inflow from the new CRT Joint Venture, treasury stock
disposition, and expansion of LGE operations.
Risk Management
Material Challenges
As LGE expands its operations throughout the world, its risks and uncertainties become
more complicated. In order to maintain control, LGE continuously analyzes its business
environment and anticipates possible challenges.
Material challenges that LGE may face in 2001 include, but are not limited to, an increase
in the price of oil, depreciation of the euro, and a sudden setback in the Korean economy.
To mitigate such impacts, LGE has prepared for a variety of situations and focuses on
manufacturing high-value-added products.
Foreign Exchange Risk
To manage foreign exchange volatility within acceptable limits, LGE is engaged in a
variety of hedging transactions. The net cash flow of foreign currencies maturing within
one year is hedged through hedging transactions with value dates up to three months. For
more effective management of its medium- and long-term profitability, LGE is currently
involved in hedging transactions with value dates up to six months and has increased its
minimum hedge ratio.
Preparation for Anti-Dumping Lawsuits
With the rise of its market share in major commercial markets, LGE is prepared for the
possibility of anti-dumping lawsuits. In order to keep the likelihood to a minimum, LGE
monitors its cost structures, market positions, and the performance of its competitors. As
well, it pursues strategic alliances with local manufacturers and distributors while
increasing construction of local manufacturing sites.
Outlook for 2001
LGE will not be exempt from the effects of worldwide economic deterioration. Although
strong fundamentals enabled 40% growth last year, an adverse economic situation in
combination with the proposed spin-off of its cathode ray tube manufacturing business
have compelled LGE to lower its 2001 target sales increase rate to 13%.
Risk Management
Material challenges that LGE
may face in 2001 include,
but are not limited to, an
increase in the price of oil,
depreciation of the Euro, and
a sudden setback in the
Korean economy. To
mitigate such impacts, LGE
has prepared for a variety of
situations and focuses on
manufacturing high-value-
added products.
1999
954
86
2000
1,585
171
Cash Flow
Capital expenditure
Cash flow
1998
998
260
In billions of Korean won
41