Kumho Petrochemical Annual Report 3035a

ANNUAL REPORT 2018
Since its founding in 1970, Kumho Petrochemical Co., Ltd. (KKPC) has THOUGHT-THROUGH STRATEGY VISION 2020
consistently defined the markets in which we operate. KKPC stands for

innovative petrochemical solutions and customer-focused services,
and this has made us one of the world’s largest and most competitive
producers of synthetic rubbers, synthetic resins, phenol derivatives and
specialty chemicals. We are now expanding our portfolio to include energy,
electronic materials and building materials.
In addition, KKPC and our eight affiliates have set an ambitious goal – 2019 K-INITIATIVE
to become a global leading chemical group by 2020, with annual
2018 K-PRINCIPLES
consolidated sales of KRW 20 trillion and 20 products which are ranked
in the top 5 worldwide in their respective categories. 2017 K-MOMENTUM
In 2018, with our proven strategy of discipline, consistency and performance, 2016 K-INNOVATION
we remain focused on fulfilling our customers’ requirements and exceeding 2015 K-FOUNDATION
our shareholders’ expectations. These principles are our foundation,
and they drive the innovation and momentum through which we are turning
our vision into reality.
CONTENTS
INTRODUCTION
04 Financial Highlights
06 Stock Information
08 Message from the Chairman
12 Vision 2020
13 Strategic Direction
30 Strategic Focus
MANAGEMENT REVIEW
42 Corporate Governance
46 Key Executives
48 Shareholder Value
50 Risk Management
52 Business Ethics
54 Environmental Management
56 Social Responsibility
58 Research & Business Development
60 Major Innovations
FORMATS COMPASS You can download this report on our BUSINESS REVIEW
This annual report is available This report is produced in interactive PDF format, website at http://www.kkpc.com 68 2018 Overview
in the following formats: and you can move to relevant pages within this 70 Synthetic Rubbers
report or go to related web pages: 72 Synthetic Resins
74 Other Businesses
76 2019 Outlook
Print Interactive PDF Relevant page Website link
FINANCIAL REVIEW
78 Independent Auditors’ Report
80 Consolidated Financial Statements
90 Separate Financial Statement
APPENDIX
FORWARD LOOKING STATEMENTS 98 Corporate History
Some of the information in this report constitute ‘forward looking statements’ which reflect current intentions, plans, forecasts, expectations, assumptions and 100 Chemical Affiliates
beliefs about future events or results and are subject to risks, uncertainties and other factors of Kumho Petrochemical Co., Ltd. (KKPC). These statements may 102 Global Partnerships
be identified by words such as “aim”,” “believe”, “estimate”, “expect”, “plan”, “seek”, “target”, “will”, or words of similar meaning. These statements are not 104 Global Network
guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and often are beyond the KKPC’s
control. Actual outcomes and results may differ materially from those expressed in, or implied by, the KKPC’s forward-looking statements.
FINANCIAL HIGHLIGHTS
INCOME STATEMENTS GROWTH PROFITABILITY STABILITY

(Unit: KRW billion)
3,970.4 5,064.7 5,584.9 157.1 262.6 554.6 4,546.1 4,579.8 4,616.7

2018 2017 Change
17,597
23.4
Sales 5,584.9 5,064.7 520.2
Operating Income 554.6 262.6 292.0
Income before Income Tax 616.9 289.8 327.1
Net Income 503.1 217.6 285.5
Net Financing Cost 62.8 27.6 35.2
9.9
1 1.8
7,647
5.2
2,618
4.0
4.8
BALANCE SHEETS
(Unit: KRW billion)
2016 2017 2018 2016 2017 2018 2016 2017 2018

2018 2017 Change
Sales (KRW billion) Earnings per Share (KRW) Operating Income (KRW billion) Operating Margin (%) Total Assets (KRW billion) Return on Equity (%)
Total Assets 4,616.7 4,579.8 36.9
Total Liabilities 2,268.6 2,623.0 -354.4
Total Equity 2,348.1 1,956.8 391.3
SALES BREAKDOWN & EXPORT BY REGION
KEY FINANCIAL RATIOS

(Unit: %)
2018 2017 Change (%p)

18%Domestic
82% Export
66% Export
34%Domestic
Operating Margin 9.9 5.2 4.7
Debt-to-Equity Ratio 96.6 134.0 37.4
Return on Equity 23.4 11.8 11.6 SYNTHETIC RUBBERS SYNTHETIC RESINS

Interest Coverage Ratio 9.73 4.01 5.72 Southeast Asia 49% China 42%
Earnings per Share (KRW) 17,597 7,647 9,950 China 19% Europe 15%
Southwest Asia 13% Southwest Asia 12%
America 9% America 1 1%
Europe 9% Southeast Asia 10%
Others 1% Africa 10%
* Based on K-IFRS consolidated financial statements
04 05
KUMHO PETROCHEMICAL ANNUAL REPORT 2018
STOCK INFORMATION
SHARE DATA STOCK PRICE MARKET CAPITALIZATION DIVIDEND

(Unit: KRW) (Unit: KRW million) (Unit: KRW)
82,000 99,500 87,300 2,586,939 3,140,230 2,756,127 800 1,000 1,350

2018 2017
Number of Shares 33,491,177 33,491,177
Common Shares 30,467,691 30,467,691
Preferred Shares 3,023,486 3,023,486
Market Capitalization (KRW million) 2,756,127 3,140,230
Credit Rating from Korea Information Service A- A-
PER SHARE DATA

(Unit: KRW)
4.8
2018 2017 2016 2017 2018 2016 2017 2018 2016 2017 2018
Net Income 17,597 7,647
Book Value 94,364 74,076
Dividend 1,350 1,000
Share Price STOCK PRICE IN 2018

Kumho Petrochemical KOSPI Index
Year-end 87,300 99,500
(Unit: KRW) Highest (Unit: Point)
High 117,000 99,700
125,000 117,000 2,600
Low 80,100 67,100
120,000
2,500
115,000
Lowest
110,000
80,100 2,400
105,000
SHAREHOLDER STRUCTURE
(Unit: %) 100,000 2,300
95,000
2018 2017 2,200

90,000
Major Shareholders 24.68 24.68 85,000

2,100
Free Float 48.51 47.45 80,000
75,000 2,000
70,000
65,000 1,900
* Based on K-IFRS consolidated financial statements
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
06 07
MESSAGE FROM THE CHAIRMAN
We will realize our goal of becoming a ‘Global Leading

Chemical Group’ by solidifying our fundamentals based
on outstanding achievements in 2018, the first year
of our new advance, and also by continually pursuing
change and taking on new challenges.
DEAR VALUED STAKEHOLDERS,

2018 was a year of significant achievement for Kumho Petrochemical (KKPC) as our perseverance during difficult
times bore fruit. Despite the slowing growth in Korean manufacturing industry and stagnation in global economy
as a result of the US-China trade conflict, we recorded our best performance in seven years. This was thanks to
the measures we had taken to preemptively respond to market conditions, improvements in profit structure, and
the on-going encouragement and support that we have received from our stakeholders.
Consolidated sales for 2018 grew 10.3% year-on-year to record KRW 5,584.9 billion, and operating income
stood at KRW 554.6 billion, a 111.2% increase over the previous year. Net income reached KRW 503.1 billion, its
highest since 2011, which was mainly attributable to increased equity method gains and improved performances
across our major chemical affiliates. These achievements also led to improvements in our financial stability. We
made active efforts to repay borrowings, and as a result, our debt-to-equity ratio fell from 134.0% at year-end
2017 to 96.6% at the end of 2018. Our financial structure also strengthened, including an improved current ratio.
We have continued to take on challenges. We have improved product competitiveness by differentiating our
commodity synthetic rubber and resin products, increased productivity by improving production processes, and
enhanced cost competitiveness through a corporate-wide cost reduction program. We also responded to rapid
market changes by undertaking research to expand our line-up of highly functional and eco-friendly products. In
addition, we built a foundation for sales growth by completing the capacity expansion for acrylonitrile butadiene Chan-koo Park
styrene (ABS) powder and epoxy resin, thus securing a competitive edge and expanding our markets even in a Chairman & CEO
difficult business environment. Kumho Petrochemical
08 09
MAJOR INITIATIVES
Uncertainties remain in the external environment, including the stagnant global economy due to the prolonged
US-China trade conflict, and concerns over strengthened import regulations as a result of China’s increased
self-sufficiency in petrochemical products. In addition, full vertical integration of companies with naphtha
cracking centers (NCC) is likely to trigger even fiercer competition. We will therefore continue to pursue change
for future growth by turning obstacles into opportunities, rather than resting on the laurels of our achievements
over the past year.
First, we will ensure sustainability by identifying new growth drivers. We will optimize our business structure
by assessing the sustainability of all our businesses, and by reviewing the competitiveness of each business
area. We are aware that growth can only be achieved when we move beyond our existing businesses, and
develop new products and expand into new markets. We will therefore set strategic growth direction and
secure future competitiveness by building a strong business portfolio through a range of M&A activities.
Second, we will further improve our profit structure. We will curtail costs across all areas, including purchasing,
production, inventory, logistics and sales. We will ensure the supply of key feedstocks, and improve the
profitability of commodity products through differentiation. We will also increase sales of high value-added
products, in tandem with our capacity expansion for acrylonitrile butadiene (NB) latex and ABS powder.
Third, we will expand our capability with better communication. We will establish an optimal system to enable
us to respond to the changing business environment and customer demands across sales, production,
research and management. Internally, we will promote communication and collaboration, and build a healthy
organizational culture that focuses on fostering talent, expanding training, and increasing opportunities for self-
development. This will ensure that everyone at KKPC has pride in the company and in their own work.
In these times of change and Fourth, we will strengthen environmental and safety management. We will continually inspect our environmental
and safety systems, and make sure that all of our work is always handled in accordance with the latest manuals
uncertainty, we will ensure on fundamentals and principles. We will engage in strict safety and environmental management at each plant
competitiveness by turning site, so that we can achieve a record of zero industrial accidents and disasters.
obstacles into opportunities,

We will always challenge the status quo and consider new possibilities for future growth although the business
thereby achieving stronger and environment remains difficult. The success of 2018 is a critical opportunity for us to look at our basic capabilities
sustainable growth. and to prepare for the future. We will therefore strengthen our fundamentals and principles with a renewed
focus on the basics, and continue to seek out the changes and challenges that will lead us to become a ‘Global
Leading Chemical Group’.
I ask all of our stakeholders to make this journey with us, trusting in our experience and skills. I also ask for your
unwavering interest and continued support.
Thank you.
10 11
VISION 2020 STRATEGIC DIRECTION
SLOGAN
Our commitment to delivering value to

our customers that goes beyond the best
is reflected in our group slogan.
RE:VISION
Ambitious vision and proactive actions, together with a clear focus on
long-term value creation for our stakeholders, have transformed KKPC into
a global petrochemical company. In 2018, we actively pursued our course of
transformation while remaining true to the strategic direction that have guided
us through the years – strong foundation for continued growth, innovation
from every angle, and momentum for future growth.
K-FOUNDATION
K-MOMENTUM
K-INNOVATION
SALES IN KRW TRILLIONS WORLD-CLASS PRODUCTS
We aim to be a global leading We aim to be a global leading
chemical group with sales of chemical group with 20 world-class
KRW 20 trillion by 2020. products by 2020.
K-Foundation
CORE Strong foundation for continued growth
MISSION
VALUES
FOR OUR CUSTOMERS PASSION FOR EXCELLENCE

We create customer value with the best We take the initiative with responsibility and passion,
solutions and synergy. always learning as we aim for world-class professional and
technical leadership in pursuit of our vision.
FOR OUR SHAREHOLDERS K-Innovation
We deliver shareholder value by selecting INNOVATION FOR SATISFACTION Innovation from every angle
and focusing to maximize profits. We embrace change as we proactively strive to deliver
increasingly greater value to our customers, unencumbered
by conventional practices and success formulas.
FOR OUR EMPLOYEES
We work to create a virtuous cycle of growth
where both company and employees grow. COLLABORATION FOR UNITY
We build personal and professional trust through respect
for diversity, open communication and mutual collaboration.
FOR HUMANITY & THE ENVIRONMENT
We will create green chemicals that coexist
RESPONSIBILITY FOR INTEGRITY
K-Momentum
in harmony with people and nature.
Our commitment to social and corporate responsibility is Momentum for future growth
built on a commitment to the basics that puts environmental
safety and corporate ethics first.
More information is available on our website at www.kkpc.com/eng/
12 13
SALES BREAKDOWN BY BUSINESS
(Unit: %)
Synthetic rubbers
Synthetic resins
Other businesses
RE:THINK
K-Foundation Sales (KRW billion)
2018 was a year of resilience and growth. 5,584.9

Despite challenging market conditions, 2018
we recovered momentum for growth, 5,064.7

2017
bet all our operating targets, and delivered 3,970.4
a strong performance based on the solid 2016
36.1
foundations which have enabled us to remain

competitive even in difficult times. KKPC is
40.8
K-FOUNDATION
K-MOMENTUM
K-INNOVATION
21.9
now fully prepared to meet the challenges of 39.3 23.8
the future, and to deliver balanced, profitable 26.1 42.0

35.4
and stable growth. 34.6

Phenol derivatives 74.9%
Specialty chemicals 5.8%
Energy 8.8%
Others 10.5%
BALANCED GROWTH
Our continued focus on diversifying our business structure in order to preemptively respond to market changes
and uncertainty are bearing fruit. Consolidated sales for 2018 recorded KRW 5,584.9 billion, with all of our
businesses seeing balanced growth. Our synthetic rubber business increased sales volumes and improved its
profitability by enhancing the productivity of its special rubber products. Our synthetic resin business continued to
grow by expanding production capacity for its high value-added ABS powder product, and by establishing stable
sales channels. There were also noticeable improvements in both the sales and profitability of phenol derivatives.
P. 68-69
14 15
QUARTERLY PERFORMANCE TREND FINANCIAL STABILITY
(Unit: KRW billion) (Unit: KRW billion)
165.8
Sales Borrowings
1Q 165%
Operating Income Debt to Equity Ratio (%) 1Q
153.5
2Q
163%
160%
4Q
151.0 2Q 151% 150%
3Q 3Q 146%
3Q
2Q 134%
4Q 127%
95.0 84.3
1Q
4Q 4Q 115% 115%
65.4 65.7 4Q 1,352.6 2Q 3Q
57.7 103% 2,080.6
2Q 1Q
3Q 1Q 97%
44.2
2Q 4Q
4Q 1,212.3
46.3
1,809.1
1Q
3Q 1,450.6
23.5 21.9
3Q 4Q
3Q 1,205.1
4Q 1,093.0 1,457.0
2Q 1,441.8
2Q 1,239.1
3Q 994.4
K-FOUNDATION
K-MOMENTUM
K-INNOVATION
1Q 1,339.9
2Q 1,011.5 1Q 1,408.2
1Q 871.5
2018
2016
2017
2017
2016
2018
111.2%
Year-on-year growth of operating income
37.4%p
Year-on-year improvement of debt-to-equity ratio
PROFITABLE GROWTH STABLE GROWTH

In 2018, KKPC firmly maintained our growth momentum based on solid profitability, recording a surplus for the The solid performance has led to improvements in corporate fundamentals of KKPC. With our major businesses
73rd consecutive quarter. In synthetic rubber business, improvements in profitability and sales were driven by our generating strong cash flows, we continued to pay back borrowings. As a result, our debt-to-equity ratio dropped
proactive responses to changes in market demand for special rubber products. In phenol derivatives business, from 134.0% at the end of 2017 to 96.6% at the end of 2018. Our interest coverage ratio improved from 4.01x to 9.73x,
as a vertically-integrated manufacturer, we flexibly adjusted the supply of phenol derivatives by identifying demand while our asset turnover ratio improved from 1.11x to 1.21x. Thanks to these operational and financial improvements,
and supply status of our products and by forecasting market fluctuations in order to maximize profitability. This has in 2018, NICE Investors Service and Korea Ratings upgraded our corporate credit rating outlook from A- (stable) to
enabled us to achieve a strong performance in phenol derivatives that led overall growth for the company. A- (positive).
P. 68-69 P. 50
16 17
WORLD-CLASS PRODUCTS
SBS – Newly selected as a world-class product

Styrene butadiene styrene (SBS) is a copolymer made by polymerizing
RE:ACT butadiene and styrene in an organic solvent. Developed in 1994 using
in-house technology, SBS received the IR52 Jang Young-shil Award in
1996, and was selected as a world-class product in 2018 as a result of
consistent efforts to improve the properties of the product and to expand
K-Innovation
market. In 2018, we completed the development of an SBS grade that
conforms to the Food and Drug Administration (FDA) standards for plastic
modification and adhesive usage, which will enable us to satisfy market
requirements and customer needs, thereby increasing sales worldwide.
KKPC responds decisively to market conditions

through ingenuity and agility, with a particular
focus on product innovation. As a result, we have
been able to strengthen our portfolio to include
17 world-class products, high value-added products
and next-generation growth businesses, which will
enable us to accelerate the pace of innovation as
K-MOMENTUM
K-INNOVATION
we seek to become a global leading chemical group.
GLOBAL PLAYER
KKPC is developing globally competitive products,
promoting exports, and leading global markets.
In 2018, SBS was selected as our 17th world-class
product, keeping us on track towards the realization
of Vision 2020.
P. 65
18 19
HIGH-VALUE-ADDED PRODUCTS
KNL 834 – Launching a new NB latex product

KKPC continues to release new market-leading products
based on our technological know-how in the area of NB latex.
At the end of 2017, we developed KNL 834, with increased
tensile strength and stability, and began sales in 2018.
By developing distinctive products and expanding capacity,
we will further strengthen our leading position in the
high-growth NB latex market. In addition, we will ensure
stable sales by building sales systems for existing customers
and attracting new customers.
SSBR – Adding values to tires

Solution styrene butadiene rubber (SSBR) is a high value-added
synthetic rubber which improves a tire’s wear resistance and
fuel efficiency. In order to overcome the limitations caused by
a tire’s fuel efficiency performance being in inverse proportion
to braking power, we acquired a technology for manufacturing
synthetic rubber denaturants and continue to release new
products. In particular, we have focused on cutting-edge synthetic
rubber technologies since 2016, with demand for SSBR forecast
to increase in line with the launch of a new tire efficiency grading
system in China. By doing so, we are further strengthening our
leadership in the global synthetic rubber market.
K-MOMENTUM
K-INNOVATION
Styrenic-type impact modifiers – Making global impacts
ABS (including ASA) resins are commodity resin products which are used for products that
are part of our daily lives, including electrical and electronics, automobiles and construction
materials. KKPC is focused on higher value-added compounding products, and we are No. 1
globally in the market share for an impact modifier (powder), which is the most important
compounding resin products. Leveraging our in-house technologies, we recently developed an
impact modifier which has outstanding mechanical properties and overcome the coloration
limitations of existing ASA products by using BD/BA rubbers. We are now making preparations
for the full commercialization of this product.
GROWTH DRIVER
KKPC’s high value-added, highly functional products set
new standards in the global synthetic rubber and synthetic
resin markets. Our outstanding products add values to
P. 59
everyday life, which in turn supports our continuing growth.
20 21
STATE-OF-THE-ART TECHNOLOGIES
Display technologies for future growth

The display industry is focused strongly on the potential for rollable
displays. KKPC has developed a transparent resin that can be
applied to OLED rollable TVs. Its performance has been successfully
evaluated, and it is now being commercialized. We have also developed
a functional adhesive that protects OLED devices, and we are now
verifying its performance for a diverse range of OLED devices. New possibilities of carbon nanotube technology
Based on these successes, we are expanding our display products, Carbon nanotube (CNT) is a major new development in material science
and we anticipate strong growth in this area. as it is not only lightweight but also delivers high tensile strength
and outstanding electrical conductivity. KKPC has been developing
composite products which apply CNT technology to our existing
products. In resin business, we are using the technology to differentiate
our commodity products, including high impact polystyrene (HIPS)
and ABS compounds. In addition, we are developing high value-added
products, such as HIPS and PP masterbatches, and we expect to begin
sales in 2019. In rubber business, we have completed the development
of an NdBR masterbatch for tires, and R&D is now taking place to
ensure effective commercialization. In solution products, we have
completed the commercialization of a black latex that can be applied
to industrial gloves. We are also developing CNT for lithium secondary
batteries, to be used in next-generation high-performance batteries.
New milestones in PR for

3D NAND flash memory
3D NAND flash memory vertically arranges circuits of 2D NAND flash
memory. With fierce competition over layers in the 3D NAND flash
K-MOMENTUM
K-INNOVATION
memory market, the thickness of photoresist (PR) being demanded by
our customers is increasing steadily. As a result, all PR manufacturers
in Korea and overseas are focusing on developing thick PR which can
increase the number of layers. In 2018, KKPC successfully developed
KrF for 3D NAND flash memory and i-line thick PR, and began sales at
home and abroad. Moreover, we are expediting the development of a
thick PR for next-generation 3D NAND flash memory.
NEW FRONTIER
KKPC has been at the forefront of innovation in the petrochemical
industry. We are now expanding into new business areas with
cutting-edge technologies, in order to improve synergy with existing
P. 59
businesses, generate new growth, and thus drive more innovation.
22 23
RE:SET
K-Momentum
The willingness to aim higher is what sets
KKPC apart. We are moving toward our goals
by investing in new opportunities that will
enable us to achieve strong performances
in the years ahead. In 2018, we set a plan
to expand our production capacity and
reorganized R&BD teams in order to be fully
K-MOMENTUM
prepared to meet the challenges of the future,
thereby sustaining our momentum towards
stronger and sustainable growth.
LEADING MARKET BY READING THE MARKET

Only companies with an in-depth understanding of their markets can be leaders. It is also vital to build foundations for sustainable,
long-term growth through preemptive investment. Despite constant market volatility, KKPC thrives by pursuing innovation and
looking to develop drivers of new growth, which has enabled us to maintain our robust growth momentum in 2018, even in difficult
market conditions.
24 25
LEADING THE MARKET
KKPC has maintained our growth momentum by proactively responding to market
changes. Our NB latex production capacity is being expanded by an annual capacity
of 150,000 tons, with the goal of completion in the second quarter of 2019, and thus
further solidifying our position as the world’s No. 1 NB latex manufacturer. Kumho P&B
Chemicals plans to expand its production capacity for epoxy resins by 45,000 tons
in the first quarter of 2019. In addition, the company has begun investing since 2019,
with an aim to expand its BPA capacity by 200,000 tons by the second half of 2021,
in response to increased demand for BPA as a result of PC capacity expansion.
Kumho Mitsui Chemicals will complete a 60,000-ton increase in its annual production
capacity for MDI in the second half of 2019.
PRODUCTION CAPACITY EXPANSION

1)
KKPC
2) 3)
Kumho P&B Chemicals
(Unit: MT/Y) 4)
Kumho Mitsui Chemicals
No. 1 in the world No. 1 Korea

650,000
550,000
450,000 410,000
400,000
350,000
197,000
152,000
2018 2019(E) 2018 2019(E) 2018 2021(E) 2018 2019(E)
NB LATEX 1) EPOXY RESIN2) BPA3) MDI4)

P. 69-71
26 27
READING THE MARKET
KKPC has been expanding our R&D activities across all business areas with an aim
to ensure sustainable growth momentum. In 2018, we reorganized our eight existing
research teams into three organizations − Synthetic Rubbers Lab, Synthetic Resins Lab
and New Business Research Lab − and established the “research resource pool-type”
research system. This project-centered system, through which a research project can
be created, organized and disbanded at any time, has enabled us to use our research
capacity in the most flexible and efficient way possible. This agile operational structure,
based on collaboration between researchers, also ensures the proper
execution of research projects in line with our corporate strategy, and now
we are well positioned to lead changes by reading the market.
PROJECT-ORIENTED
R&BD SYSTEM
Following the reorganization of

a research system in 2018, the
Synthetic Rubbers Lab, Synthetic
Resins Lab and New Business
Research Lab select research SYNTHETIC RUBBERS LAB SYNTHETIC RESINS LAB NEW BUSINESS RESEARCH LAB
projects and undertake related R&D It is in charge of research activities related to It is in charge of research activities related to It focuses on securing our future competitiveness
activities at their respective areas. product development as well as performance product development as well as performance through research related to new businesses,
and process improvements of synthetic rubber and process improvements of synthetic resin such as CNT applied products. It is also in
and latex products. products and building materials. charge of R&D for fine chemical products, and
conducts research activities on applied products
of existing products and new products.
P. 58-59
28 29
STRATEGIC FOCUS
EN:VISION
KKPC firmly believes that sustainability is pivotal to our future success,
helping us drive innovations and achieve long-term growth. It guides
and inspires how we live and work, and how we manage our people and
operations. In 2018, we focused on building a safe and sustainable working
environment, looking to work in partnership with empowered employees
to deliver long-term, sustainable value for all our stakeholders.
ENSURE
Safe workplace by
achieving zero accident
ENABLE ENCOURAGE
Green growth by Global talents to
reducing ecological challenge the
footprint status quo
30 31
Building a safety culture
In order to ensure the integrated management of the EHS infrastructure,
KKPC holds integrated safety and environmental management meetings led
by the CEO twice a year, and thus reviews the environmental and safety processes
at each plant site. At the Safety and Environment Committee meeting that is
held at least once a quarter, we discuss and make prompt decisions on EHS
management policy, plans and regulations. We also strive to prevent accidents
and respond to any that takes place by improving our emergency operational
systems, including setting up emergency organizations at each plant site and
holding emergency response drills.
Other measures that improve safety management include comprehensive safety

inspections in each area and weekly ‘safety protection dialogue’ at all plant
sites. Changes in safety and environmental regulations are monitored every
day, and shared on internal bulletin boards. In addition, we review safety of
working environment for all employees and suppliers. We also identify risk factors
preemptively through annual internal safety inspections at each plant and
cross-safety inspections between plant sites, which include external expert
inspectors, in our efforts to improve safety management facilities.
ZERO ACCIDENT STATUS AT KKPC
Yeosu Plant Ulsan Synthetic Rubber Plant Ulsan Synthetic Resin Plant Asan Electronic Materials Plant Yesan Building Materials Plant
21x 10x 10x 5x 1x

as of October 7, 2018 as of May 9, 2018 as of June 13, 2018 as of March 13, 2019 as of March 17, 2019
ENSURE
safe workplace
Safety is our top priority which cannot be overstressed. KKPC has built a company-wide
integrated environment, health and safety (EHS) system, through which we are creating
a safe and healthy workplace.
P. 54-55
32 33
Pursuing green growth
In response to a growing interest in environmental issues in the international
community and among our stakeholders, KKPC actively implements international
environmental agreements. Moreover, we stay ahead by observing internal
environmental regulations that are stricter than legally required, and undertake a
wide range of environmental management and protection activities. We established
our environmental vision as being ‘a company that creates the future as a partner of
humanity and the environment’ in 2008 when we prepared for another leap forward
sustainable growth.
Our green policy consists of considering all EHS processes, continuous

improvements in EHS performance, zero EHS accidents, minimizing environmental
pollutants, improving work environment, strengthening internal and external
awareness of EHS management, and active communication with stakeholders.
We have also set four mid- to long-term goals − ‘developing eco-friendly products’,
‘saving energy and protecting climate’, ‘taking the lead in EHS at home and abroad’
and ‘strengthening system execution capabilities’. In order to meet these goals, we
established a number of key strategies, and as a result of these efforts, we earned
the ‘green company’ certification from the Korean Ministry of Environment.
ENVIRONMENTAL VISION SYSTEM
Environmental Vision Mid-to Long-term Strategy
A company that creates the future • Develop eco-friendly products

as a partner of humanity and the environment • Save energy and protect climate
• Take the lead in EHS at home and abroad
• Strengthen execution capabilities of system
ENABLE
green growth
The natural environment is the foundation for human life, and must be protected at all costs.
KKPC strives for eco-friendly growth through green chemistry, enabling humankind and the
environment to co-exist in harmony.
P. 54-55
34 35
Sharing values and common goals
Everyone at KKPC is committed to the same core values − a passion to become
the best, innovation to satisfy customers, communication and collaboration to build
trust, and a sense of responsibility towards society and the company − and they
work in unison to realize the company’s vision. Employees perform their roles with
maximum effort, based on common sense and principles, and in return, KKPC
evaluates them impartially, using transparent and fair HR and salary systems.
Moreover, we make the utmost effort to create an optimal working environment for
the best talent, offering a safe and clean workplace and helping them achieve the
right work-life balance.
KKPC’s labor and management enjoy excellent cooperation and communications,

which is our competitiveness and pride. Since 2001, we have had a one-company,
three-labor union system through which we collect and reflect various opinions
at each plant site. As a result, we have benefitted from dispute-free wage
negotiations and collective agreements for 31 years. In 2018, an agreement was
reached to adopt flexible working hours, enabling employees to plan their working
hours autonomously and flexibly, and discussions on how to put this agreement
into practice are on-going.
ABILITY - Salaries which reflect
employee ability
KKPC PERSONNEL SYSTEM
PERFORMANCE - Incentive system rewards

for both individual and
corporate performance
ENCOURAGE
ROTATION - Job rotation system
which provides career
development opportunities
and challenge
Our people are best assets, and also vital to our future growth. KKPC develops talent with expertise
and leadership, and supports them as they take on the challenges that will realize our vision of becoming
a ‘Global Leading Chemical Group’
36 37
Fostering global leaders
KKPC continually reviews and adapts our HR development and management processes, helping our employees
improve their skills so that they can become a ‘global leader who takes on challenges’. In addition, we help new
employees successfully settle in through a mentoring system, with new staff receive mentoring advice and help for a
year after joining the company.
KKPC helps our employees to grow into top global talents in their respective fields. We have been running a job
qualification system since 2010, and encourage employees to earn nationally- and internationally-recognized certificates
and technical qualifications. Under this system, the company, provides financial support for all educational and testing
fees, as well as book costs and other related incidental expenses. Support has been offered to help staff qualify as
American Institute of Certified Public Accountants, Financial Risk Managers, Chartered Financial Analysts, Certified in
Production and Inventory Management, and Project Management Professionals. In addition, we provide in-depth training
content and events to help employees with their self-development through the ‘WinK Academy’, an internal online
training system that was independently developed by KKPC and has been operating since 2011. Lectures are available
on a wide range of subjects, including the humanities, international business culture and etiquette, foreign languages
and reading management. Lectures on around 15 foreign languages, including English, Chinese and Japanese, are
available for free.
EMPLOYEE TRAINING
Total training expenses Training expenses per person Training hours per person
(Unit: KRW million) (Unit: KRW million)
1,736 2,168 1.35 1.67
*As of 2018
81
2017 2018 2017 2018
38 39
MANAGEMENT REVIEW
42 Corporate Governance
46 Key Executives
48 Shareholder Value
50 Risk Management
52 Business Ethics
54 Environmental Management
56 Social Responsibility
58 Research & Business Development
60 Major Innovations
40 41
CORPORATE GOVERNANCE
OUTSIDE DIRECTORS’ ATTENDANCE RATE
Sound corporate governance is fundamental in winning trust. KKPC has therefore established an advanced Jin-ho Myoung-kee Hwi-sung
Yong-man Rhee Woon-oh Jeong Ock-ryeol Song
corporate governance system with its Board of Directors taking a central role, in order to ensure transparency Chung Jang Lee
for stakeholders and increase trust in the company’s management. Board Meetings 100% 100% 100% 100% 83% 100%
Audit Committee Meetings 100% 100% ‒ 100% 100% ‒
Outside Director Nominating

100% 100% ‒ ‒ ‒ ‒
Committee Meetings
BOARD OF DIRECTORS BOARD COMMITTEES
KKPC’s Board of Directors (BOD) is a decision- In order to ensure the efficient and professional
making body that makes important decisions and operations of the BOD, KKPC has established two
provides advice on business activities. All BOD committees within the BOD − the Audit Committee
decisions represent shareholder interests, and are and the Outside Director Nominating Committee. The BOARD AGENDA OVERVIEW BOARD STRUCTURE
aimed at maximizing corporate value from a long-term, Audit Committee focuses on increasing transparency (Unit: Items) (Unit: %)
sustained perspective. As of the end of 2018, the in the management of the company, and ensuring the
BOD consisted of nine directors, including six outside accuracy and credibility of accounting information. It
directors who were recommended by the Outside consists only of outside directors, and is chaired by 5
4
Director Nominating Committee and elected at the an expert in accounting and finance. The Outside
67% 33%
annual general meeting (AGM). In 2018, there were Director Nominating Committee also consists only of 3
eight Board meetings to decide on 31 agenda items outside directors, and uses an impartial process to 1
related to major business matters. identify, screen and recommend suitable candidates
2 Outside Directors Inside Directors
as outside directors.
To guarantee the independence and expertise of
the BOD, outside directors hold a majority of the
seats. Three new outside directors were elected
at the 2018 AGM, resulting in a total of six outside
directors, doubling previous year’s figure. BOD 1 Finance and accounting 17
meetings are held periodically to conduct detailed 2 Sales and marketing 6
reviews of the company’s major business issues, with 3 Governance 4
active participation of outside directors, recording an
attendance rate of around 97%. We plan to look into
4 Investment
5 Others
1
3 31
measures to form the Board members in order to
ensure more stable BOD operations and to help them
make decisions from various perspectives.
GOVERNANCE STRUCTURE
BOARD OF DIRECTORS AUDIT COMMITTEE
3 Inside Directors 6 Outside Directors 4 Outside Directors
• Chairman Chan-koo Park • Member Yong-man Rhee • Chair Jin-ho Chung

• Member Seong-chae Kim • Member Jin-ho Chung • Member Yong-man Rhee
• Member Dong-joon Moon • Member Myoung-kee Jang • Member Woon-oh Jeong
• Member Woon-oh Jeong • Member Hwi-sung Lee
• Member Hwi-sung Lee
OUTSIDE DIRECTOR NOMINATING COMMITTEE
• Member Ock-ryeol Song
2 Outside Directors
• Chair Yong-man Rhee

• Member Jin-ho Chung
42 43
BOD COMPOSITION
INSIDE DIRECTORS OUTSIDE DIRECTORS
Chan-koo Park Seong-chae Kim Dong-joon Moon Yong-man Rhee Jin-ho Chung Woon-oh Jeong
- Chairman & CEO, Kumho Petrochemical - President & CEO, Kumho Petrochemical - Vice President & CEO, Kumho P&B Chemicals - Chair, Outside Director Nominating Committee - Chair, Audit Committee - Member, Audit Committee
- Member, Audit Committee - Member, Outside Director Nominating Committee - Professor, Seoul National University
- Former Minister, Korean Ministry of Strategy & - Chairman & CEO, The Wells Investment Business School
Finance
Chan-koo Park chairs the KKPC BOD Seong-chae Kim is the President & CEO Dong-joon Moon is the Vice President Yong-man Rhee is an incumbent outside Jin-ho Chung is an incumbent outside Woon-oh Jeong is an incumbent outside
and is also the Chairman of KKPC, of KKPC, making decisions on major & CEO of Kumho P&B Chemicals, director of KKPC. Mr. Rhee has extensive director of KKPC. He has extensive director of KKPC. He previously served as
the top decision-maker in corporate business matters for the company. Mr. Kim and is also part of KKPC’s corporate experiences in finance and policy, experiences in finance and investment President of the Korean Academic Society
management. Mr. Park graduated from graduated from Yonsei University in Korea management that makes decisions on the having previously served as Secretary through his career at Nomura Securities, of Taxation and the BOD Chairman of the
Iowa State University in the U.S. with a with a degree in chemical engineering company’s major business matters. Mr. in Korea’s Presidential Secretariat and and he was also formerly President & CEO Korea Accounting Institute. He is currently
degree in statistics. He then joined KKPC and then joined KKPC. He has led a wide Moon joined KKPC after graduating from Minister of Strategy & Finance. He is also of Prudential Investment & Securities. He a business administration professor at the
and has served as the CEO of several range of sales activities in Korea and the Department of Agricultural Economics a member of both the Audit Committee is now the incumbent Chairman & CEO Seoul National University Business School.
chemical companies, including KKPC overseas throughout his career, which has at Korea University. After working in and the Outside Director Nominating of The Wells Investment. As an expert in As an expert in finance and accounting,
and Kumho Mitsui Chemicals. During his given him extensive experiences in the planning and overseas business at KKPC, Committee, and contributes to the stability accounting and finance, Mr. Chung is Professor Jung offers his opinions
more than four decades at KKPC, he has synthetic rubber industry. He has been he took charge of management and and independence of KKPC’s corporate a member of both the Audit Committee from a principles-based and analytical
made major decisions in the company’s part of KKPC’s corporate management finance at Kumho Mitsui Chemicals and governance. and the Outside Director Nominating perspective, which considerably enhances
corporate development. He also served as President & CEO since 2010 and Kumho P&B Chemicals. With this extensive Committee, and contributes to the stability decision-making capabilities of the BOD.
as chair of the International Institute of continues to lead the company’s experience, he has been contributing to and independence of KKPC’s corporate He also contributes to the stability and
Synthetic Rubber Producers (IISRP) from development. the company as Vice President & CEO of governance. independence of KKPC’s corporate
2010 to 2011, leading the development of Kumho P&B Chemicals since 2012. governance.
the synthetic rubber industry.
Hwi-sung Lee Myoung-kee Jang Ock-ryeol Song

- Member, Audit Committee - Member, Audit Committee - Professor, Seoul National University
- Former CEO, IBM Korea - Former Director, Korea Exchange Bank School of Law
- Former Vice President of Strategy, - Chairman & CEO, Fidelis Partners
IBM Headquarters
- CEO, Innovation Company ShallWe
Hwi-sung Lee is an incumbent outside Myoung-kee Jang is an incumbent Ock-ryeol Song is an incumbent outside
director of KKPC. He previously served outside director of KKPC. He has served director of KKPC. Previously a lawyer at
as CEO of IBM Korea and Vice President as a deputy director of major banks the Kim & Chang law firm, he is now a
of Strategy at IBM Headquarters, and is in Korea, including Shinhan Bank and professor at the Seoul National University
currently CEO of the Innovation Company Korea Exchange Bank, and is currently S c h o o l o f L a w. H e b r i n g s a l e g a l
ShallWe. His experience is a major asset in Chairman of Fidelis Partners. With his perspective to resolve legal risks related
decision-making that requires multilateral considerable experience in the financial to decision-making, and contributes to
and multinational perspectives, including sector, he provides extensive help and the stability and independence of KKPC’s
issues relating to the company’s new advice on decision-making on the corporate governance.
business and mid- to long-term strategy. company’s funding and investment
He also contributes to the stability and policy, and contributes to the stability
independence of KKPC’s corporate and independence of KKPC’s corporate
governance. governance.
44 45
KEY EXECUTIVES
Our management team consists of talented, dedicated professionals whose diverse experiences and unique
perspectives drive sustainable growth at KKPC. They make effective and sound business decisions by thinking
ahead, and also by acting with integrity, fairness and transparency.
Dong-joon Moon Seok-geun Song Sun-gyu Kim Chang-soo Jung Jong-hoon Baek Jeong-hwan Kim Jung-chan Lee Min-ho Kim Young-chan Jang Jong-sub Byun
• President & CEO • Senior Executive Vice President • Senior Executive Vice President • Executive Vice President • Executive Vice President • Vice President • Vice President • Vice President • Vice President • Vice President
• Production Division • Administration Division • Ulsan Synthetic Rubber Plant • Sales Division • Yeosu Plant Administration & • Yeosu Specialty Chemicals • Strategic Planning • Research Planning • Yeosu Energy Plant
Management Plant
Jin-yong Park Young-hoon Ko Young-do Ko Kab-jong Chang Chul-wan Park Young-ho Chun Taek-young Lee Han-won Hong Gwang-hoon Kwag Ha-gil Kim
• Executive Vice President • Executive Vice President • Vice President • Executive Vice President • Vice President • Vice President • Vice President • Vice President • Vice President • Vice President
• Planning & Coordination • Kumho Petrochemical R&BD • Purchasing & Accounting • Yeosu Synthetic Rubber Plant • Synthetic Rubber Overseas • Synthetic Resin Research • Ulsan Synthetic Resin Plant • IT Strategic Center • Synthetic Rubber Research • Synthetic Resin Domestic Sales
Division Center Sales
Jun-kyung Park Dong-kook Kim Kwun-wook Heo You-sun Song Joo-hyung Park Bon-jae Ku Jong-nam Hong Phil-woong Lee Chang-won Bang Jae-yu Kim
• Vice President • Vice President • Vice President • Vice President • Vice President • Vice President • Vice President • Vice President • Vice President • Vice President
• Synthetic Resin Sales • Electronic Materials • Building Materials Business Unit • Technology & Energy Business • Purchasing & Finance • Synthetic Rubber Sales • Production Director, • Production Director, • Production Director, • Administration & Management
Unit Yeosu Synthetic Rubber Plant Ulsan Synthetic Resin Plant Ulsan Synthetic Rubber Plant
46 47
SHAREHOLDER VALUE MAJOR IR ACTIVITIES IN 2018
In order to ensure that our company is fairly valued in
SHARE DIVIDEND
KKPC does its utmost to ensure that increases in its
the market, KKPC communicates through continuous corporate profits are shared with shareholders. In 2018,
KKPC’s commitment to all of our stakeholders is reflected in why we focus on creating values for them. In and consistent investor relations (IR) activities, and we recorded our best results since 2011. To ensure that
particular, we have been involved in extensive dialogues with our shareholders as part of our efforts to enhance from a long-term perspective. In addition, we strive to these improvements were shared with shareholders,
build a consensus with investors by actively leveraging we increased cash dividends to KRW 1,350 per
shareholder value, while also increasing our corporate value.
information which can be shared with the markets. We common share and KRW 1,400 per preferred share,
therefore publish public notices about the company’s a year-on-year dividend increase of 35%, representing
performance and major business matters, and 27% (KRW 1,350) and 28% (KRW 1,400) of par value
share performance and other data on our website, in (KRW 5,000), respectively. Our largest shareholders
addition to holding regular meetings with investors. received a different, lower cash dividend of 24% (KRW
CAPITAL MARKET OVERVIEW 1,200), similar to the payout on common shares, in
Stock markets around the world went down in 2018, positive in the first half of the year, it did not last long. In 2018, we hosted small weekly group meetings with order to support our corporate development. The
with interest rate hikes by the US Federal Reserve and Other external factors, including the US-China trade domestic investors in order to share information about increased cash dividend is particularly significant
the US-China trade conflict bringing uncertainty to conflict and tight monetary policy of the US Federal the company’s status and market conditions, and to because it was made even though we were also able
global stock markets. As a result, the US stock market Reserve, resulted in considerable volatility in the KOSPI gather objective opinions from an outside perspective. to pay down debt in order to improve our financial
failed to follow up on its positive start to the year, and all stock index. In chemicals industry, increased uncertainty Moreover, we held one-on-one meetings and structure. We will continue to aim for further increases in
three major indices, including the Dow Jones Industrial from the US-China trade conflict weakened demand conference calls with investors with language, timing dividend payments by continuing to improve profits.
Average, went down. European stock markets were for chemical products, and the chemicals index fell by or geographical constraints, as part of our efforts to
also sluggish, mainly attributable to the US-China trade 19.7% from the previous year. make sure that domestic and overseas investors have
conflict, Brexit and financial instability in Italy. China’s the same level of communications. We will continue to
Shanghai Composite Index declined significantly during undertake a wide range of IR activities and focus on
the year as well. Global stock markets were also held SHARE PERFORMANCE improving our performance by responding proactively
back by tight monetary policies in major economies and Market conditions for phenol derivatives improved to market fluctuations, which will help us to enhance
the pressures of a potential full-scale trade war. noticeably in 2018. The performance of our core shareholder value.
synthetic rubbers business was also improved over the
Korea’s stock market was not able to avoid the previous year, which in turn attracted more interest in our
downturn. The Korea Composite Stock Price Index shares from investors, especially from overseas. The KKPC STOCK PRICE vs. KEY INDEXES
(Unit: %) Kumho Petrochemical KOSPI Index Chemicals Index
(KOSPI) began the year at 2,467.49 points, but fell by proportion of our shares held by foreigners increased
17.3% to end the year at 2,041.04, the worst annual from 28.05% at the end of 2017 to 34.94% at the end of 180
160
performance since the global financial crisis. Although 2018.
140
inter-Korean economic cooperation was a major
120
Thanks to good performance from each of our
100
business areas in the first half of 2018, and the inflow 80
FOREIGNERS’ SHARE OWNERSHIP of investment from long-term, high-quality foreign 60
(Unit: %)
institutional investors, our share price rose from KRW 40
33.48 34.94
28.05 29.32 99,500 at the beginning of the year to KRW 116,500 20
27.31
during the first half of 2018. However, in the second Dec. 2013 Dec. 2014 Dec. 2015 Dec. 2016 Dec. 2017 Dec. 2018
18.97
half of the year, the US-China trade conflict, along with
the resulting weaker market demand and company
STOCK PERFORMANCE IN 2018
performance, led to our share price finishing the year at
Stock Price (Unit: KRW) Trading Volume (Unit: 1,000 shares)
Dec. 31, 2016 Dec. 31, 2017 Mar. 31, 2018 Jun. 30, 2018 Sep. 30, 2018 Dec. 31, 2018 KRW 87,300.
103,000 90,600 96,400 107,500 105,000 116,500 113,000 102,000 98,500 86,100 92,200 87,300
120,000
100,000 5,000
80,000 4,000
4,580
4,035
60,000 3,000
ANNUAL REPORT RECOGNITION
3,536
3,613
3,616
3,349
40,000 2,000
Our 2017 Annual Report received three Grand Awards at the Traditional Annual Reports Category, Interior Design Category and
2,874
2,740
2,844
2,528
2,504
Best of Korea Category in the International ARC Awards. The 2017 Annual Report also received a top award, the Platinum Award, in
1,895
20,000 1,000
the LACP Vision Awards, proving its level of excellence reached to annual reports of world-renowned companies. Each year, KKPC
publishes an annual report as a way to communicate with stakeholders, and we have entered our annual reports in global annual 0 0
report contests since 2008 and have consistently won awards. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
48 49
RISK MANAGEMENT
Disciplined, preemptive risk management not only ensures stable business operations but also builds lasting
value for stakeholders. KKPC manages risk at the company level in order to respond to major changes in global
markets, which in turn enables us to manage short-term uncertainties and deliver future growth.
FINANCIAL RISK RAW MATERIAL RISK

As of the end of 2018, our net debt stood at KRW 1,355 BUTADIENE As of the first quarter of 2019, butadiene STYRENE MONOMER In 2019, as in 2018, China’s
billion, a year-on-year decrease of around KRW 220 (BD) price has remained steady as derivatives styrene monomer (SM) imports are likely be limited
billion, and our debt-to-equity ratio was 96.6%, down demand recovery has been delayed while the market due to an impact of anti-dumping duties (ADD). In
37.4%p year-on-year. There will be further investment is adopting a wait-and-see attitude due to concerns the first half of the year, when there is a concentration
activities in 2019, but we do not expect the same over the US-China trade conflict. A price rise is of regular maintenance by Asian SM manufacturers,
level of large-scale investments as those which took expected in the first half, with regular maintenance strong prices are expected in tandem with recognition
place before 2016. Although it may be difficult to by BD producers in Europe and Asia, resulting in of the low point of SM prices. However, high inventory
generate similar operating cash flows this year due to tight supply for a limited period. However, the impact levels in China and the US-China trade conflict are
the prolonged US-China trade conflict, the resulting of this temporary factor will be insignificant if there expected to result in sluggish demand for derivatives,
uncertainties, and sluggish demand in upstream is no improvement in demand for derivatives. In the which may restrain price rises. In the second half of the
industries, we will lower our debt-to-equity ratio by second half, new plants will come into operations in year, prices are forecast to weaken as the completion
reducing debt through effective liquidity management. Korea, China and other Asian countries, closing the of regular maintenance in the region stabilizes supply. NET DEBT & DEBT-TO-EQUITY RATIO
(Unit: KRW billion, %)
We anticipate that this will lead to improvements in gap between supply and demand and thus stabilizing In general, there will be price fluctuations driven by
1,884 1,575 1,355
our corporate credit rating and lower financial costs. prices. varying demand for derivatives. Net Debt
In addition, considering our long-term holdings of Debt-to-equity Ratio
available-for-sale securities in Daewoo Engineering & Given this business environment, we will aim to reduce Given this business environment, we will maintain
Construction and Asiana Airlines, as well as treasury the risks associated with lead times by increasing the proportion of purchases in Korea, while also
shares, our financial liquidity position is satisfactory. domestic and regional contracts. We also plan to diversifying domestic and overseas suppliers, in
reduce costs by improving our BD plant utilization rate. order to ensure stability of supply. In addition, we plan
163
to increase the proportion of our spot purchases of
134
CURRENCY RISK imported items as a response to the price volatility
expected in the second half of the year.
Exports in 2018 accounted for 66% of our total sales. YEAR-ON-YEAR DECREASE IN NET DEBT
97
Around 74% of sales were in foreign currencies,
including 8% of domestic local sales, 93% of which
were in US dollars. Although our foreign currency
14.0% 2016 2017 2018
incomes are higher than expenses due to the high

level of exports, the gap is less than 15% which is YEAR-ON-YEAR DECREASE IN DEBT-TO-EQUITY RATIO 2018 BUTADIENE PRICE / 2018 STYRENE MONOMER PRICE
(Unit: USD/ton)
a long cash position. Exchange rate fluctuations
37.4%p
Butadiene Price
therefore have a relatively small impact on the Styrene Monomer Price
2,000
company’s overall profits and losses.
1,721
1,710
1,670
1,623
1,465
1,499
1,454
1,431
1,429
1,421
1,409
1,426
1,411
1,391
1,380
1,367
1,345
1,318
1,298
1,000
1,179
1,130
1,108
1,059
1,014
0
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
*Source: CFR CHINA ICIS 2018
50 51
BUSINESS ETHICS WIN-WIN RELATIONSHIPS
Our suppliers are also important business partners In May 2018, we hosted the ‘KKPC Partnership
and stakeholders. We therefore focus on strengthening Academy’ in partnership with the Korea Foundation
High standard of business ethics has been fundamental to KKPC since the company was founded. We aim to mutual trust and cooperative relationships with for Cooperation of Large & Small Business, Rural
operate our business fairly and transparently, treat our suppliers with dignity and respect, and build long- them. Our basic policy on supporting suppliers is Affairs, and approximately 50 employees from 45
to help them improve their management stability suppliers were invited. In addition, the Win-win Fund
term partnerships with all of our stakeholders, with an aim to create sustainable value.
and operational efficiency, as well as to engage in was established in 2018 as a way to provide suppliers
technological cooperation. Based on that, we are with financial support. We will continue to increase
increasing the number of payments made to small and exchanges with suppliers through such measures as
medium-sized suppliers in cash, providing financial the Win-Win Fund and KKPC Partnership Academy −
and training support, sharing information, developing a professional training program to improve the skills
ETHICAL MANAGEMENT technologies together, and offering technical support. of both KKPC and supplier employees. The Academy
ETHICAL MANAGEMENT SYSTEM KKPC declared our ETHICAL MANAGEMENT ACTIVITIES In order to build In addition, we have made the ‘win-win index’, will also promote the consignee-consignor council,
commitment to ethical management in September a corporate culture of integrity, KKPC operates the established by Korea Commission for Corporate and reinforce our overall cooperation network.
2002, and since then has built an institutional ‘Cyber Report Center’ on the company homepage, Partnership, one of major focuses for our work.
infrastructure, so that we can adhere to all international, which enables employees or anyone else to report
national and social regulations and norms as a trusted violations of the company’s codes or rules of ethics
company. We have also put into place ‘codes of at any time. We also hold the ‘Transparent National KEY AREAS OF ETHICAL MANAGEMENT
ethics’ and ‘rules of ethics’, which serve as criteria Holiday Campaigns’ on major national holidays every
by which our employees can determine appropriate year, including on New Year’s Day and at Chuseok
actions and values, thereby establishing solid (Korean Thanksgiving Day). We send notices to
foundations for implementing ethical management. In our suppliers as part of our commitment to fair and
addition, based on the belief that ethical management transparent business relationships, and we prohibit
is not only a prerequisite for a company’s survival but our employees from receiving improper gifts from
TRUST WIN-WIN SOCIAL RESPONSIBILITY ENVIRONMENT & SAFETY
also core competitiveness for sustainable growth, stakeholders. Moreover, the ‘Gift Report Center’ has
we continue to strengthen our ethical management been established so that if an employee receives a We strive to be a trusted and We are creating a culture of We are making the world a brighter, We strive to be in harmony
systems, in an effort to enhance our corporate value. gift due to unavoidable circumstances, that gift can be respected company by win-win growth with warmer place by caring for with nature and create a safe
dealt with appropriately. In cases that absolutely require practicing transparency. our stakeholders. the disabled and underprivileged. and pleasant work environment.
gifts or expenditure, such as the sending of traditional

wreathes or gifts for congratulations or condolences,
we adhere strictly to the letter and spirit of the ‘Improper
Solicitation and Graft Act’ regulations.
52 53
ENVIRONMENTAL MANAGEMENT RESPONSE TO CLIMATE CHANGE
In recognition of the importance and needs to counter In order to satisfy the facility management criteria for
climate change, KKPC has built a corporate-wide the reduction of emissions of hazardous air pollutants
KKPC strives to build a society in which people coexist with nature. The environment and safety are at the system that aims to reduce our GHG emissions, and (HAPs) stipulated in the Clean Air Conservation Act, we
heart of our business operations as we pursue sustainable, green growth in a way to fulfill our corporate social the taskforce formed in support of this system has have built an inventory of all possible leakage points,
formulated mid- to long-term strategies in response. including valves, flanges and gaskets, and operate
responsibilities and also enhance our competitiveness.
In addition, we partner with outside professional a leak detection and repair (LDAR) system. We also
organizations to implement GHG emission reduction changed all our pumps to either dual mechanical seal
projects, including by inspecting emissions levels and or sealess equipment, in line with the stricter facility
analyzing the potential and marginal abatement costs. management criteria for pumps relating to controlled
We also share related issues through a company intranet, substances. With a charge for nitrogen oxide being
EHS VISION & INITIATES EHS MANAGEMENT SYSTEM while providing educational programs to raise employee adopted at the end of 2018 and a strengthening of
KKPC’s eco-friendly management is based on its KKPC operates an integrated EHS management awareness. In a way to curtail energy costs, we invested emission standards expected in 2020, we will manage
environmental vision of being ‘a company that creates system that is run by each plant site’s environmental approximately KRW 1,449 million and replaced 16,008 the discharge of pollutants according to internal
the future as a partner of humanity and the environment’. and safety team under the Senior Executive Vice light fixtures with LED equivalents in 2016 and 2017. standards that are stricter than legal requirements. To
We aim to practice green chemistry, with humankind President of Production, with the CEO taking the overall this end, we will continue to improve our operational
and the environment coexisting in harmony, so that lead. The CEO also supervises integrated safety and methods and facilities.
we set out our environmental, health and safety (EHS) environmental management meetings that take place REGULATORY COMPLIANCE
policies in 2018 and put company-wide efforts in order twice a year. These meetings underline our commitment KKPC actively complies with all Korean and international
to implement them. The policies consist of pursuing to safety and environmental management, share laws on chemical safety. In Korea, these include the 2018 EHS POLICIES
sustainability management, operating a business with information on relevant activities, and address issues Act on Registration, Evaluation, Etc. of Chemicals, and • Pursue sustainability management by establishing an EHS system based on ISO standards
a focus on EHS, minimizing environmental pollutants that we face at the company level. Integrated safety the Chemicals Control Act. As part of our response to • Put EHS at the center of all business operations
and greenhouse gas (GHG) emissions, increasing and environmental management meetings were held the Act on Registration, Evaluation, Etc. of Chemicals, • Minimize environmental pollutants and GHG emissions in order to protect citizens’ health and
employee awareness of EHS, strengthening EHS in June and December 2018, at which reports were we have further strengthened the previous chemical preserve nature
management and accident prevention activities, and presented on each plant site’s safety and environmental • Increase employee awareness of EHS through consistent education and training, and
management system and thus established ‘KKPC
active communication
complying with all relevant laws. performance for the previous year and plans for the Chemical Management System (KCMS)’ in 2016 at • Strengthen EHS management and accident prevention activities in order to achieve zero accidents
year ahead, and other relevant information was shared. all our plant sites. By doing so, we have created an • Build an EHS culture by complying with all relevant laws and based on trust
Our major environmental and safety goals are As such, based on the integrated operations of our inventory of all the chemicals that we handle, and we
achieving zero environmental and safety accidents, EHS management system, we evaluate all processes, transparently and systematically manage all relevant
reducing the emission of pollutants, maintaining the beginning with the acquisition of feedstock, and thus information. In order to produce hazard and risk PROMOTING A CULTURE OF SAFETY AND ENVIRONMENT
‘green company’ certification from the Ministry of manage and improve all factors that influence the information on the 510 types of chemicals that are
Safety and environment management system
Environment, improving our Productivity Management environment and safety. subject to registration with the Ministry of Environment,
System (PMS) grade, and reinforcing a culture of • Integrated safety and environmental management meetings led by the CEO
we formed a joint chemicals registration consortium
• Industrial Safety and Health Committee, EHS Committee
safety, and we undertake a range of activities to We have earned EHS-related certifications at our plant with member companies of the Korea Petrochemical • Safety zone certification for plant sites
achieve these goals. For example, as part of our efforts sites. In 1996, KKPC became the first company in the Industry Association, and completed chemicals • Safety management as a business subject to the Process Safety Management (PSM) system
to make the workplace safe and healthy, we have world in our industry to obtain ISO 14001 certification, registration in June 2018, ahead of the legal deadline. • Operate environmental management programs, including ISO 14001, Green Company and
Responsible Care
invested KRW 6,521 million since 2015 to remove an international environmental certification from Bureau Moreover, in order to respond to the Act on Registration, • Operate safety and health management programs, including KOSHA 18001 and OHSAS 18001
asbestos, a class 1 carcinogen, and the removal was Veritas, an international certification agency. We made Evaluation, Etc. of Chemicals, as amended in 2018, • Conduct evaluations of process and non-process risk factors
completed in 2018. preparations necessary for the transition from ISO we will complete prior registration of all chemicals held • Establish an emergency response system and emergency scenarios
14001: 2004 to ISO 14001: 2015 in 2018, and we in the amount of 1 ton or more by June 2019, and then • Invest in and improve facilities
are now focusing on ensuring that our systematic register each tonnage as required by law.
INVESTMENT IN ENVIRONMENT AND SAFETY management is in line with the new standard. We also Safety training, campaigns and activities Suppliers’ safety management
(Unit: KRW million)
follow the OHSAS 18001 and KOSHA 18001 safety In response to the Chemicals Control Act, we received
• Provide safety trainings and measure • Meetings for permanently-stationed suppliers
8,719 2018 and health management systems, and evaluate all approval for our offsite risk assessment reporting and performance on a regular basis • Safety and health meetings attended by
risks related to health and safety, with a particular focus risk management plans, including planning for toxic • Provide safety trainings to new employees and representatives from suppliers
managing supervisors • Joint safety inspections with suppliers
on managing high-risk activities and facilities. chemicals accident scenarios and countermeasures at
19,415 each plant site. We have also established a mid- to long-
• Provide outsourced professional safety trainings
• Three zero − zero accident, zero disease, zero
• Safety evaluations on suppliers
• Implement win-win cooperation programs for
2016 term toxic chemicals facility improvement plan in order to pollution – campaign jointly conducted by labor safety and health
and management
comply with chemicals-handling facility standards within • Safety inspections and patrols
2017 five years as required by law. Facility improvements • Safety work management
currently under way will ensure 100% compliance with • Campaigns for safe environment
3,295
* Investment in environmental facilities,
safety facilities and environmental safety the standards by December 2019, the legal deadline. • Activities to predict risk
54 55
SOCIAL RESPONSIBILITY In order to promote science education, and thus foster
young talent that will shape the future of our society,
KKPC launched the ‘Chemical Frontier Festival’ in 2004
under the slogan ‘Dream of a future created through
As a responsible and active member of society, KKPC takes a proactive and long-term view of corporate social
chemistry’. This program is designed to help high
responsibility, rather than simply running one-time events. We also encompass more active forms of support school students by encouraging them to become
through employee participation, which makes a positive impact on society as a whole. more interested in chemistry, and also contributes to
the development of chemistry over the long-term. We
host the Chemical Frontier Festival every year, donating
around KRW 100 million to the program and providing
expert judges on the experiments and research
SOCIAL CONTRIBUTIONS MAJOR CSR ACTIVITIES presented at the Festival. This is both a positive
In recent years, increasing attention has been given SPECIAL INITIATIVES We are leveraging our core influence on society and builds our image as a leading
to the concept of corporate social responsibility competencies in cutting-edge technologies and petrochemical company.
(CSR), and in tandem with this trend, KKPC’s social outstanding products to help resolve a wide range
COMMUNITY INITIATIVES KKPC operates a wide
contributions have developed, from donations and of social issues. One example is the program we
the provision of goods to active win-win participation have in place to offer customized aids to people with range of social contribution programs to encourage
and sharing. KKPC’s social contribution activities severe disabilities. Initiated in 2008, this program has employee participation. For example, all employees
leverage our expertise as a global petrochemical been providing assistive devices that are specially round their monthly salary down to the nearest KRW
company, thereby generating unique values. We also designed to deal with the degree of disability and the 1,000 and donate the rounded sum, in addition to
encourage active participation of employees, so that specific needs of the disabled. In 2018, we donated fixed-amount donations. The funds collected through
sharing can be a vital part of the corporate culture of customized wheelchairs to 26 disabled people at these campaigns are donated to the underprivileged
KKPC, including by offering substantial and systematic eight residential facilities for the disabled. In addition, at the end of every year, and in response to our
support for employee volunteer activities and by we have been running a support program for the employees’ commitment to helping others, the
presenting awards to employees every year based on visually disabled across the nation through which we company raises funds through a matching grant and
their social contribution activities. provide white canes with improved quality to ensure donates to local communities in need of a helping
easy portability and storage. In 2018, we donated the hand. In 2018, we delivered donations to related
funds to produce 1,650 white canes through the Korea facilities and groups across Korea, including the
EXPENDITURES IN CSR ACTIVITIES Welfare Foundation for the Visually Handicapped. Eastern Social Welfare Society, a welfare organization MAIN CSR ACTIVITIES
(Unit: KRW million)
Since the launch of program in 2008, approximately for infants and the local community.
20,000 white canes have been donated to those in
need. Moreover, we manufactured easy-to-use yellow We are also cooperating with outside organizations to
583.8 braille blocks and braille readers to help the visually diversify our social contributions. We hold an annual
2018 disabled – these were then donated to schools for the blood donation drive in partnership with the Korean
blind and welfare facilities across the nation. Red Cross, and in 2018, we hosted a ‘Love Donation Special Initiatives Community Initiatives
Event’ in cooperation with the Beautiful Store, through
which around 6,800 articles were donated by some 1 1
515.4
Provide customized assistive Employee donations of small
Another major social contribution program that
280 employees for delivery to the Beautiful Store. devices to people with severe changes from salaries or fixed
KKPC has been running since 2008 is to replace old disabilities amount, and a matching grant
2016
windows at social welfare facilities with our premium of the company
‘Hugreen’ window systems. In 2018, we replaced In addition, we help farming villages through our One
2017
windows at a senior care center in Gangwon Province Company, One Village sisterhood relationship. In 2018, 2 Provide assistive devices to
we purchased agricultural products for the New Year the visually disabled 2 Blood donation campaign
534.2 with a Hugreen PVC window system worth KRW 50
million, which helped to resolve issues that the care holiday, hosted a spring farmers’ market, and ran a
center had been having with condensation, heat loss program through which our staff gave a helping hand 3 Support social welfare facilities 3 One Company, One Village
and noise. On same day as the windows were being with farming. We also provided agricultural machinery, through Hugreen window sisterhood relationship
replaced, KKPC employees cleaned the facility and its including a cutting-edge high-performance sprayer. systems
EMPLOYEE PARTICIPATION IN CSR ACTIVITIES environment, took the residents on walks and enjoyed 4 Employee volunteer programs
keeping them company, and participated in other 4 Support educational programs
5,514 persons volunteer activities.
*As of 2018
56 57
RESEARCH & BUSINESS DEVELOPMENT R&BD INVESTMENT PER PERSON
(Unit: KRW million)
Research & Business Development (R&BD) is an integral part of KKPC’s strategy. We

leverage our unique, specialized R&BD strategy, and by combining with unwavering
commitment to innovation, we focus on maximizing synergy in our core businesses and
211.2
(42,442/201)
2018
MAJOR INNOVATIONS WORLD-CLASS PRODUCTS

developing next generation growth engines.
• Synthetic Rubbers 194.8 • SBR
- Developed F-LiBR for (41,489/213) Styrene butadiene
tires 2016 rubber
- Commercialized NB R&BD ORGANIZATION KUMHO ELECTRONIC MATERIALS LABORATORY • HBR

latex with outstanding High-cis polybutadiene
In 2005, KKPC moved away from typical R&D and quality and developing eco-friendly products for better The Kumho Electronic Materials Laboratory was 2017
chemical resistance rubber
adopted a new concept called Research & Business
Development (R&BD). R&BD transcends traditional
competitiveness, creating new growth drivers with the
aim of developing core business items for the future,
opened in Asan, South Chungcheong Province, in
1998 to conduct R&D activities of semiconductor
192.6 • NBR
(37,935/197) Acrylonitrile butadiene
• Synthetic Resins simple R&D activities and undertakes technological and applied research of key technologies in order and display materials. In 2018, it strengthened its rubber
* R&BD investment is the sum of budgets for expenditures and
- Developed eco-friendly development which aims at creating value by to maintain a business sustainability. In addition, the capabilities in new business by adding the CNT investment • LBR
SAN resin connecting the project and commercialization right Center aims to make technological breakthroughs that research team. Its location next to a production plant Low-cis polybutadiene
rubber
from the initial selection of the research project, and enable our recently-launched products to become the gives the Laboratory strengths in quality improvements,
• NB Latex
• Specialty Chemicals then planning for marketing, commercialization, best in the world. new product development and commercialization
Acrylonitrile butadiene
- Developed multi- etc. R&BD activities drive our sustainable growth, across all of its targeted businesses, which include latex
functional epoxy paint and revolve around two major pillars − the Kumho In 2018, the Center formed a research organization semiconductor products, such as photoresist
• KSL-341 foam latex
diluent Petrochemical R&BD Center and the Kumho Electronic that will lead the development of distinctive (PR), bottom anti-reflective coating (BARC) and
• EPDM
Materials Laboratory. The Kumho Petrochemical R&BD technologies for product groups connected to existing photosensitive polyimide (PSPI), transparent resins Ethylene propylene diene
• Electronic Materials Center in particular became the first in chemicals businesses, while also improving its organization to be and functional adhesives for displays, and applied monomer
- Developed a new research to build a research project management centered around research projects. This system allows CNT composite products. • KUMANOX 13
ArF immersion BARC system, and it conducts company-wide feasibility us to respond rapidly to changes in the business antioxidant
product analysis beginning with the selection of research environment and technologies through continuous The Laboratory has registered more than 200 patents in • KUMANOX 5010L
projects. All projects are divided into basic research, research and development in current and future PR, being recognized as a leading Korean researcher antioxidant
development and commercialization phases, and then businesses. The Center will continue to identify and in this area. Based on the technologies, KKPC has As a result, there is now considerable emphasis on • PA
managed in a systematic manner, thus maximizing the develop further world-class products, as well as the been developing advanced products that meet developing thick PR with an increased number of Phenolic additives
efficiency of our R&BD activities. next-generation technologies that will enable us to customer requirements and generating significant layers in the Korean and Chinese semiconductor • MIBK
create new synthetic materials. export growth. The Laboratory is also expanding markets. In 2018, we completed the development of Methyl isobutyl ketone
its market presence by developing products in line KrF and i-line thick PR for 3D NAND flash memory, and • BPA
Bisphenol-A
KUMHO PETROCHEMICAL R&BD CENTER with current semiconductor technologies, as well began sales in both domestic and overseas markets.
• Phenol
as focusing on next-generation products. In 2018, it We are now working on meeting requirements for
The Kumho Petrochemical R&BD Center was first • Aceton
concentrated on developing thick PR for 3D NAND additional processes, which is expected to drive an
established at our Yeosu plant in 1985, and it was • Polymethylene
flash memory. 3D NAND flash memory is considerably increase in sales.
subsequently expanded and relocated to Daedeok polyphenylisocyanate
faster than 2D NAND flash memory, has a much
Innopolis in 1994. This was then followed by the • Diphenylmethane-4,
greater capacity, consumes less electricity, and offers In the display business, the Laboratory is focused
integration of our Icheon R&D center and the Ulsan 4,diisocyanate
outstanding stability and durability. Although NAND on developing products that can be applied to next-
Latex R&D center in 2003 to launch the present • SBS
flash memory manufacturing is structurally simple, generation displays, with the aim of expanding its
Kumho Petrochemical R&BD Center. Styrene butadiene
volatile pricing has prevented it from gaining much product line-up and staying ahead of the competition styrene
traction in the semiconductor market. However, the in future growth drivers. In the CNT business, it
It undertakes advanced research to ensure
recent development of 3D NAND flash memory, which aims to increase sales in the mid- to long-term by
technological and price competitiveness in our existing
can increase the degree of integration per unit area, commercializing high value-added products, including
products, including synthetic rubbers, synthetic
has boosted margins as the number of layers has resin applied products, rubber applied products and
resins and specialty chemicals. It also focuses on
increased. solution products. In 2019, the Laboratory plans to
developing next generation growth drivers. The Center
build on the R&D achievements of 2018 and increase
takes the lead in creating market-leading products
sales across all business areas, from semiconductor
through detailed research in four areas − developing
and display materials to CNT.
new products to meet customer needs, upgrading
58 59
MAJOR INNOVATIONS
Synthetic Rubbers
• Synthetic Rubbers • SBR

- Developed F-LiBR for Styrene butadiene
tires rubber
• HBR
- Commercialized NB
• NBR
• Synthetic Resins rubber
- Developed eco-friendly • LBR
SAN resin Low-cis polybutadiene
rubber
• NB Latex
• Specialty Chemicals
- Developed multi- latex
functional epoxy paint
diluent
• EPDM
Ethylene propylene diene
• Electronic Materials monomer
- Developed a new • KUMANOX 13
ArF immersion BARC antioxidant
product
• KUMANOX 5010L
antioxidant
• PA
Phenolic additives
• MIBK
Methyl isobutyl ketone
• BPA
Bisphenol-A
• Phenol
• Aceton
Developed F-LiBR for tires Commercialized NB latex with • Polymethylene
polyphenylisocyanate
Lithium butadiene rubber (LiBR) is a synthetic rubber made by using a lithium Features outstanding chemical resistance Features
• Diphenylmethane-4,
catalyst and butadiene. It is used mainly in manufacturing HIPS and ABS resins. The purpose of wearing gloves is to protect the skin from the external
Best fuel efficiency KNL 870: High level of 4,diisocyanate
KKPC has developed functional-lithium butadiene rubber (F-LiBR) by converging environment, such as the physical environment and chemical environment.
in the world safety for a wide range of • SBS
LiBR with our synthetic rubber manufacturing and eco-friendly functionalization The role of gloves in providing protection from the chemical environment is chemicals Styrene butadiene
technologies. F-LiBR offers the best fuel efficiency in the world, with 20-40% vital especially when chemicals are being handled. KKPC has successfully styrene
improvements in efficiency compared to existing BR tire materials. Thanks to developed and commercialized ‘KNL 870’, an NB latex for chemically-resistant
its low heat build-up and excellent resistance to blow-outs, F-LiBR can be used gloves which offers a high level of safety for a wide range of chemicals. This
in truck and bus radial (TBR) materials, as well as in materials for all other tires. has expanded our range of materials for industrial gloves which includes ‘KNL
In addition, because its modification is unrestricted and its glass transition Low heat build-up and 860’, used for coating gloves and other applications, and now we have NB latex NB latex product line-up for
temperature can be adjusted, it can be applied to the new concepts of tires. excellent blow-out products for all types of rubber gloves, from medical, experimental and industrial all types of rubber gloves
As such, we leveraged new technology to upgrade a commodity rubber to a resistance use to kitchen gloves. As a result, we further solidified our leading position in the
specialized rubber for tires, thereby creating new value. global rubber gloves market. Going forward, we continue to focus on attracting
new customers and increasing sales of our NB latex, while also developing
market-leading products.
60 61
Synthetic Resins Specialty Chemicals
• Synthetic Rubbers • SBR

tires rubber
• HBR
- Commercialized NB
• NBR
• Synthetic Resins rubber
SAN resin Low-cis polybutadiene
rubber
• NB Latex
• Specialty Chemicals
- Developed multi- latex
diluent
• EPDM
Ethylene propylene diene
• Electronic Materials monomer
- Developed a new • KUMANOX 13
ArF immersion BARC antioxidant
product
• KUMANOX 5010L
antioxidant
• PA
Phenolic additives
• MIBK
• BPA
Bisphenol-A
• Phenol
• Aceton
Developed eco-friendly SAN resin Developed multi-functional epoxy paint diluent • Polymethylene
polyphenylisocyanate
Atyrene acrylonitrile (SAN) resin is used in various products, ranging from food Features KKPC offers an eco-friendly epoxy paint diluent additive that has the chemical Features
• Diphenylmethane-4,
and cosmetics containers to parts for home appliances and disposable lighters. features of nonylphenol (NP) but without the risks associated with existing NP. In
Technology that can Outstanding usability as a 4,diisocyanate
Although demand for SAN resin has been rising, Food Contact Material (FCM) 2018, we released Kumanox-3113, a multi-functional epoxy paint diluent, thus
completely remove all hydrocarbon group • SBS
regulations stipulated in EU Regulations and GB 4806.7, which is the national remaining AN strengthening our product line-up. It is a non-reactive diluent which can be used
Styrene butadiene
standard criteria in China, have recently become stricter, making it more difficult in paints for construction, heavy duty paints for ships, adhesives and composite styrene
to export to these markets. KKPC has sought to minimize remaining acrylonitrile materials. As a hydrocarbon group, Kumanox-3113 offers extremely good
(AN) by optimizing devolatilization process and applying a re-extrusion method, usability with epoxy resins and amine hardeners. In addition, it offers excellent
but it has proved difficult to satisfy all relevant regulations. We have therefore adhesive power and improved mechanical properties since it comes from a
obtained a technology that can completely remove all remaining AN through Remaining AN control high hydroxy functional group. It can be used to both main agent and hardener, Excellent adhesive power
a reactive extrusion method which uses a special additive that functions as a process under development and because there is no discoloration after mixing, it can also be applied to and mechanical properties
scavenger for leftover AN. Now we are making additional improvements to this transparent materials. improvement
technology in relation to manufacturing costs, and we expect to complete the
development of AN control process with price competitiveness in the near future,
which will enable us to lead the eco-friendly SAN market.
62 63
Electronic Materials 17 World-class Products
MAJOR INNOVATIONS Styrene butadiene rubber (SBR) Phenolic additives (PA) WORLD-CLASS PRODUCTS
This synthetic rubber product is manufactured by the emulsion This fine chemical product is added to polymers such as rubber,
• Synthetic Rubbers polymerization of styrene and butadiene at low temperature. SBR resin and paint, in order to maintain their performance for a longer • SBR
delivers more consistent quality, as well as excellent heat and wear period of use or a wider temperature range, and thus improve their
resistance, when compared with natural rubber, and is widely used unique properties. It prevents oxidation of the double bonds of rubber
tires as a feedstock for tires, shoes and industrial goods. and improves the viscosity of resin and paints, which improves rubber
processing quality and reduces processing time. • HBR
- Commercialized NB
latex with outstanding High-cis polybutadiene rubber (HBR) High-cis polybutadiene
chemical resistance HBR is manufactured through the solution polymerization of Methyl isobutyl ketone (MIBK) rubber
1,3-butadiene. With more than 96% cis content, it has outstanding MIBK is made through an acetone and hydrogen reaction using a
• NBR
wear resistance, rebound resilience, aging resistance and water catalyst. This colorless, transparent liquid is flammable and has an
resistance. Its glass transition temperature (Tg) is very low, at around unusual odor. It is used as a feedstock for vinyl, acryl, alkyd, polyester, Acrylonitrile butadiene
• Synthetic Resins -100℃, which means it is a widely used synthetic rubber product. epoxy resin solvents and various chemical reactions. rubber
SAN resin Acrylonitrile butadiene rubber (NBR) Bisphenol-A (BPA) Low-cis polybutadiene
This copolymer is manufactured by emulsion-polymerizing acrylonitrile This white crystalline solid is created through a condensation reaction rubber
and butadiene at low temperatures. NBR is a synthetic rubber product between phenol and acetone, in the presence of a catalyst. It is used
• NB Latex
• Specialty Chemicals with excellent oil and chemical resistance, and is easy to process due as a feedstock for polycarbonate, phenolic, polyester and other
to its good usability, including roll-winding, mixing dispersibility and resins, and is used in automobiles, electricity and electronics, as well Acrylonitrile butadiene
- Developed multi- extrudability, and its proper vulcanization characteristics. as IT industries. latex
diluent
Low-cis polybutadiene rubber (LBR) Phenol
• EPDM
LBR is manufactured by using lithium catalysts. It features a cis Cumene is used as the feedstock to manufacture this colorless
content of 34.5%, good elasticity, and a vinyl bonding structure of raphide or white crystalline aggregate with a unique odor. It is used Ethylene propylene diene
• Electronic Materials around 14.5%, all of which combine to offer good reactivity. It is as a feedstock for phenolic resin, BPA, caprolactam, alkylphenol, monomer
- Developed a new mainly used as a base polymer in manufacturing HIPS. adipic acid and plasticizer, and is used in automobiles, electricity and • KUMANOX 13
ArF immersion BARC electronics, as well as IT industries. antioxidant
product Acrylonitrile butadiene latex (NB Latex)
• KUMANOX 5010L
This carboxy-modified acrylonitrile butadiene latex is used for making latex Aceton
gloves, including for medical purposes, and abrasive paper. It is replacing Aceton is manufactured using cumene as its feedstock, and is co- antioxidant
natural latex, and the market is growing sharply thanks to its durability, produced with phenol. This colorless liquid has a unique odor, and is • PA
wear resistance, high tensile strength and outstanding color hold. flammable with a low boiling point. It is used as a feedstock for MIBK, Phenolic additives
BPA and methyl acrylate, and in the manufacture of a wide range of
coatings and plastics. • MIBK
KSL-341 foam latex
This styrene-butadiene latex is used for foam rubber. Compared with
other latex, it has high density, low flow and outstanding stability, Polymethylene polyphenylisocyanate • BPA
which is why it can be used on its own to manufacture foam rubber. This material is obtained by the phosgene treatment of Bisphenol-A
It is used for mattresses, shoes, cosmetic powder puffs and impact diphenylmethane diamine, created through the condensation of
resistance reinforcing agents for various plastics. aniline and formaldehyde. It is in liquid form at room temperature,
• Phenol
and is used in a range of products, including hard foam, semi-hard • Aceton
Ethylene propylene diene monomer (EPDM) foam and CASE.
Developed a new ArF immersion BARC product • Polymethylene
This amorphous polymer material is manufactured through the polyphenylisocyanate
Bottom anti-reflection coating (BARC) is a polymer coating that is used on the Features copolymerization of ethylene and propylene. It delivers outstanding Diphenylmethane-4,4,diisocyanate
heat resistance, ozone resistance, insulation characteristics and a low This pure monomeric MDI is the result of high-purity refinement. • Diphenylmethane-4,
lower layer of PR to control light reflectivity, which enables higher resolution.
High refractive index specific gravity, making it perfect for lightweight materials. Because It is in white solid form at room temperature, and has water-like 4,diisocyanate
KKPC succeeded in the mass production of an ArF immersion BARC product of its stable chemical characteristics, it is used for a wide variety of transparency in liquid form. It features outstanding discoloration
• SBS
in 2015 and sells it. Based on this technology, we have developed a new ArF purposes, including in automobiles, electricity and electronics, as well resistance against high temperatures and UV rays, and is used in
as general industrial goods. spandex fibers and TPU. Styrene butadiene
immersion BARC product that has a higher refractive index and better etching styrene
performance than the existing product, and we are awaiting customer evaluation.
KUMANOX 13 antioxidant Styrene butadiene styrene (SBS)*
Moreover, we have been targeting the growing semiconductor market in China
This commodity antioxidant enables basic attributes of a product SBS is a thermoplastic elastomer with excellent deformation recovery
by selecting BARC products which are suited for the local market, and we are to be maintained, such as ozone resistance, flexibility resistance, and high elasticity, even without vulcanization, thanks to its unique
now moving forward with customer evaluations. High etching performance oxidation resistance and cracking prevention. Because of its chemical structure. It has multiple applications, including asphalt
coloration and staining characteristics, it is widely used in rubber, tires modification, compounding and plastic modification, and the
and belts. manufacturing of shoes and adhesives.
KUMANOX 5010L antioxidant

This high-performance phenolic antioxidant delivers outstanding
discoloration and coloration-prevention. It is a non-staining antioxidant
with low volatility, and offers both high quality and excellent price
competitiveness. It is used for a wide range of purposes, including * Newly selected in 2018
tires, belts and medical gloves.
64 65
BUSINESS REVIEW
68 2018 Overview
70 Synthetic Rubbers
72 Synthetic Resins
74 Other Businesses
76 2019 Outlook
66 67
2018 OVERVIEW Despite a difficult market environment in 2018, KKPC continued solid growth and
recorded its best performance since 2011. This was achieved thanks to production
and sales strategies formulated as a preemptive response to changing markets,
and the efforts made by each business to improve profitability.
KEY FIGURES Growth in the global economy slowed in 2018 due to increased sales mainly attributable to good utilization
(Unit: KRW billion) the increased uncertainties caused by the US-China rates from our customers, and profits also increased
trade conflict and other political issues worldwide. in line with the rise in the unit price of electricity.
International oil prices were very volatile, exceeding Backed by these combined achievements, KKPC
USD 80 in October ahead of the imposition of made substantial improvements in its performance
Sales Operating income Net income
sanctions on Iranian crude oil, but then falling after in 2018, with consolidated sales of KRW 5,584.9
5,064.7 5,584.9 262.6 554.6 217.6 503.1 eight countries were given waivers, including Korea. billion and operating income of KRW 554.6 billion,
sharp increases of 10.3% and 111.2% year-on-year,
In 2018, KKPC recorded its best performance in respectively.
seven years. The business environment was difficult,
with overall demand falling as global economic We demonstrated strong improvements in financial
10.3% 111.2% 131.2% growth slowed and commodity products remained structure as well. With performance improvements in
2017 2018 2017 2018 2017 2018 oversupplied. However, we were able to achieve our major businesses generating stable cash flow, we
good results thanks to the efforts made by all of continued to pay back borrowings, so our debt-to-
our businesses to improve their performance. Our equity ratio dropped from 134.0% at the end of 2017
Borrowings Debt-to-equity ratio (%)
synthetic rubber business has experienced years of to 96.6% at the end of 2018. Our interest coverage
1,809.1 1,457.0 134.0 96.6 challenges resulting from oversupply due to capacity ratio and asset turnover ratio also rose.
expansion in Asia, but improved profitability by
curtailing costs and enhancing productivity. In synthetic
resin business, profitability was good in the first half
19.5% 37.4%p
of the year thanks to strong demand for ABS, but fell
in the second half of the year due to negative market
2017 2018 2017 2018 sentiments resulting from the US-China trade conflict
and weak feedstocks. Our phenol derivatives business
achieved considerable increases in both sales and
operating income as a result of strong demand from
SALES BY BUSINESS upstream industries. Our energy business also saw
(Unit: KRW billion)
Synthetic rubbers Synthetic resins Other businesses
2,068.1 2,015.4 1,205.5 1,225.7 1,791.1 2,343.8
2.5% 1.7% 30.9%

2017 2018 2017 2018 2017 2018
68 69
SYNTHETIC RUBBERS Amid a challenging environment for synthetic rubber business in 2018, KKPC improved
profitability and thus proved its competitiveness. We are now preparing for new growth
by turning obstacles into opportunities through preemptive investments for the future.
2018 REVIEW
Synthetic rubber is KKPC’s key business, accounting
for 36.1% of its total consolidated sales. Sales
recorded KRW 2,015.4 billion, down by 2.5%
compared with the previous year, but profitability
increased and contributed to the improvement in the
overall corporate performance.
The global economy was stagnant in 2018 due to 2019 OUTLOOK

the US-China trade conflict and the spread of other Market conditions for upstream industries, including
political and economic risks, including Brexit. In automobiles and tires, are expected to improve in
addition, car sales volume fell in China, resulting in 2019, but the growth rate is forecast to remain low, at
global automobile production seeing its lowest growth around 1%, due to continuing political and trade risks.
rate since the financial crisis of 2009, at 0.2%. Tire As a result, growth in demand for synthetic rubbers is
production recorded the growth rate of around 1.7%, forecast to be no more than around 1.8%. In contrast,
lower than the figure of 2.9% in 2017. With weaker countries around the world are continuing with social
market conditions in upstream industries, including overhead capital (SOC) investments, and demand for
automobiles and tires, demand for synthetic rubbers NB latex gloves is expected to record growth as high
saw a growth rate of only around 0.8%, reflecting the as 8 to 10%.
continuing difficulties in the business environment.
In 2019, we will continue to adhere to our profitability-
In order to overcome this difficult business environment, focused sales policies, based on which we will begin
KKPC foc used on diversifying our product portfolio, and full sales of SBS that is used in various areas, including
sought to improve productivity and profitability. We also construction. In addition, our NB latex production
developed new markets in a way to protect profitability capacity is being expanded by an annual capacity
and improve fundamentals, which enabled us to of 150,000 tons, with the goal of completion in the
generate year-on-year improvements in profitability. second quarter of 2019, and we will begin full sales in
the second half of the year, thus increasing profitability.
Moreover, we will respond rapidly to changing market 2,068.1
conditions by making our production schedule more 2,015.4
flexible and improving inventory management.
Tires Gloves
1,559.2
KEY PRODUCTS PORTION TO TOTAL SALES IN 2018
36.1%
SBR, HBR, LBR, SSBR, NBR, HSR, NdBR, SB-Latex, NB-Latex, SBS, STE
KEY APPLICATIONS
Tires, Shoes, Automobile parts, Sporting goods, Asphalt,
Waterproof sheet, Plastics, Paper, Gloves 2016 2017 2018
SALES
MAJOR CUSTOMERS (Unit: KRW billion)
Waterproof Paper Automobile Hankook Tire, Kumho Tire, Nexen Tire, Goodyear Tire, Continental
sheet parts
Tire, Bridgestone Tire, Michelin Tire, YTY, Hartalega, Hankuk Paper
70 71
SYNTHETIC RESINS Profitability in synthetic resin business in 2018 was sluggish due to the US-China
trade conflict, and the resulting weak demand and falling product prices. In the future,
however, we will improve our competitiveness by focusing on long-term profitability.
2018 REVIEW
Our synthetic resin business accounts for 21.9% of total
consolidated sales, with sales of KRW 1,225.7 billion
in 2018, up 1.7% year-on-year. Profitability, however,
decreased.
The oversupply of synthetic resins across the globe

continued in 2018 as in 2017. In the first half of the
year, product prices rose thanks to strong demand
backed by oil price rise despite considerable volatility
caused by an unexpected issue at a feedstock plant.
However, in the second half of the year, increased
uncertainty caused by the US-China trade conflict
led to sluggish demand from China, which in turn
led to falling product prices and a difficult business
environment.
2019 OUTLOOK
Continuing oversupply in the global synthetic resin
market is expected in 2019. In particular for ABS,
there will be greater oversupply as the slowing global
economy drives down demand, combined with
expanding capacity in some regions. Both oil and
feedstock prices are forecast to decline to below the
average annual prices for 2018. However, there are
still considerable uncertainties in the global economy,
including the US-China trade conflict, and these will
greatly affect future market conditions. KKPC will
strive to increase sales and profitability by actively
Automobile Home
parts appliances responding to changes in market conditions, both in 1,225.7
Korea and overseas. 1,205.5
1,035.7
KEY PRODUCTS PORTION TO TOTAL SALES IN 2018
21.9%
PS, ABS, EP, SAN, EPS, Enerpor, PPG
KEY APPLICATIONS
Automobile parts, Home appliances, Food and beverage containers,
Office supplies, Building materials
SALES
MAJOR CUSTOMERS (Unit: KRW billion)
Food and Office Building Hyundai Motor Company, Kia Motors, GM Korea, Korea Yakult,
beverage supplies materials 2016 2017 2018
Namyang Dairy Products, Samsung Electronics, LG Electronics,
containers
Dongbu Daewoo Electronics, Kingfa, Sabic, Haier, Arcelik, Vestel,
KCC
72 73
OTHER BUSINESSES In other businesses, KKPC has maintained solid growth in 2018, mainly attributable to
a strong performance from our phenol derivatives business. We will continue to build
foundations for future growth by responding flexibly to market conditions.
2018 REVIEW 2019 OUTLOOK

Our other businesses consist of phenol derivatives, Increased supply of BPA is forecast in 2019, but at
specialty chemicals, energy, electronic materials, the same time, expanding PC capacity in China may
etc. Other businesses posted sales of KRW 2,343.8 generate increased demand. We will therefore closely
billion in 2018, a year-on-year increase of 30.9%, and follow markets and supply-demand status of our
accounted for 42.0% of our total consolidated sales. vertically integrated products, so that we can maximize
profitability through the flexible adjustment of our
The phenol derivatives business achieved significant product portfolio.
performance improvements. In particular, favorable
conditions in the polycarbonate (PC) industry led to In the specialty chemicals business, most competitors
strong prices for Bisphenol-A (BPA) in the first half of are looking at capacity expansion due to tight
the year, which helped to generate considerable year- supply caused by unstable operations of Chinese
on-year improvements in profitability. In the phenols competitors, so that oversupply is likely to continue.
business, both sales and profitability improved KKPC will therefore increase sales by focusing on
thanks to supply shortages resulting from regular global tire companies, and will build market share by
regional shutdowns and mechanical defects at newly generating new demand. In the energy business, we
expanded plants, as well as strong demand for will stabilize power plant operations, improve output
downstream products. for the most optimized operations, and enhance
profitability by improving utilization rates and diversifying
In the specialty chemicals business, our Chinese our customer base. We are also looking into the
competitors, which suffered from unstable operations potential for expanding into related businesses, and
due to China’s stricter environmental regulations in thus create mid- to long-term synergies.
2017, rebounded in 2018 and engaged in aggressive
price cuts in an effort to reclaim market share, which In the electronic materials business, we aim to expand
worsened market conditions. As a result, our sales our market share by winning more overseas customers
volume and profitability went down slightly compared for major products, and build the foundations of a
with the previous year. In contrast, our energy business rebound by introducing new products to Korea. The
delivered a stronger performance than the previous building materials business will continue to focusing
year as sales volume increased thanks to good on cost reduction and product differentiation, thereby
utilization rates of customers, and system marginal securing market competitiveness.
Phenol Specialty costs (SMP) rose in the second half of the year. 2,343.8
Derivatives Chemicals 1,791.1
Our electronic materials business increased its sales

1,375.5
volume by diversifying the range of products for sale
and by laying foundations for entry into overseas
BUSINESS AREAS markets. However, stagnating sales of major products PORTION TO TOTAL SALES IN 2018
resulted in a weaker financial performance than in the
previous year. The building materials business also
saw a slight slowdown in sales and operating income
as stricter government real estate regulations led to a
42.0%
contraction in the construction market.
2016 2017 2018
Energy Electronic Building SALES
Materials Materials (Unit: KRW billion)
74 75
2019 OUTLOOK
FINANCIAL REVIEW
In times of uncertainty, KKPC will remain faithful to principles and fundamentals, 78 Independent Auditors’ Report
80 Consolidated Financial Statements
with the goal of achieving sustained and sustainable growth. In 2019, we will focus on
improving profitability and competitiveness which will take us a step closer to being 90 Separate Financial Statement
a global leading chemical group.
In 2019, the global economy is forecast to grow by In the face of this difficult business environment,
3.5%, slower than in 2018, as a result of sluggish KKPC will not become complacent with our past
growth in major economies and increased success. Instead, we will strengthen our principles
protectionism. There are also concerns about fund and fundamentals in order to develop new
outflows from emerging nations with insufficient foreign possibilities for the future of KKPC. To this end,
exchange reserves, due to the impact of tight monetary we will improve profitability by ensuring the stable
policies in major economies. International oil prices will supply of key feedstocks and making commodity
be volatile, driven by slowing global demand for crude products more distinctive. We will also strive to
oil and other factors to push them lower, as well as enhance competitiveness across all our businesses
such factors pushing prices higher as an agreement to by responding to changing market conditions and
cut production among major oil producers, including customer demands. We will prepare for the future by
OPEC and Russia, and the full launch of sanctions looking back our fundamentals, and thus taking a step
against Iran. closer towards realizing our goal of becoming a global
leading chemical group.
76 77
KUMHO PETROCHEMICAL CO., LTD. AND SUBSIDIARIES In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to
INDEPENDENT AUDITORS’ REPORT liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Based on a report originally issued in Korean
AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
To the Shareholders and Board of Directors of whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists. Misstatements can arise from
Kumho Petrochemical Co., Ltd.
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated financial statements.
OPINION
We have audited the consolidated financial statements of Kumho Petrochemical Co., Ltd. and its subsidiaries(the “Group”), which comprise the As part of an audit in accordance with KSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
consolidated statements of financial position as of December 31, 2018 and 2017, the consolidated statements of income, comprehensive income,
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures
changes in equity and cash flows for the years then ended, and notes, comprising significant accounting policies and other explanatory information.
responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
Group as of December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in the override of internal control.
accordance with Korean International Financial Reporting Standards(“K-IFRS”). • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. But it is not for the
purpose of expressing an opinion on the effectiveness of the Group’s internal control.
BASIS FOR OPINION • Evaluate the appropriateness of accounting policies used in the preparation of the consolidated financial statements and the reasonableness of accounting
We conducted our audits in accordance with Korean Standards on Auditing(“KSAs”). Our responsibilities under those standards are further described estimates and related disclosures made by management.
in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material
accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Republic of Korea, and we have
uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and
uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures
appropriate to provide a basis for our opinion.
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or
conditions may cause the Group to cease to continue as a going concern.
KEY AUDIT MATTERS
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements
statements represent the underlying transactions and events in a manner that achieves fair presentation.
of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
(1) Appropriateness of disclosure of transactions and balances associated with related parties
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence,
As described in Note 30(Related Parties), due to the many related parties, there may be a possibility of error in appropriate disclosure of transactions
and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
and balances associated with related parties. So, we identified the appropriate disclosure of transactions and balances associated with related
related safeguards.
parties as significant risk in the audit.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the
Audit procedures we performed responsive to this risk are as follows;
consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless
• We inspected documents such as minutes of meeting of shareholders and of board of directors to obtain evidence whether there are transactions and law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
balances with related parties that the Group has not identified and disclosed. communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
• We compared the disclosures about related parties with related party relationships and transactions identified by the Group. such communication.
• We compared the disclosures about related parties with related party relationships and transactions audited by component auditors. The engagement partner on the audit resulting in this independent auditors’ report is Kwonsuk Lee.
• We performed analytical procedures on information about transactions and balances associated with related parties for the years ended December 31, 2018
and 2017.
• We inspected contracts related to transactions associated with related parties that include significant changes.
• We performed external confirmation procedures for significant balances.
Seoul, Korea
OTHER MATTER March 13, 2019
The procedures and practices used in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted
and applied in other countries.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS This report is effective as of March 13, 2019, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report
date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly,
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with K-IFRS, and for
the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or
such internal control as management determines that is necessary to enable the preparation of consolidated financial statements free from material
circumstances, if any.
misstatement, whether due to fraud or error.
78 79
KUMHO PETROCHEMICAL CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31, 2018 and 2017
In millions of won In millions of won
2018 2017 2018 2017
ASSETS EQUITY
Non-current assets Equity attributable to owners of the Group
Property, plant and equipment ￦ 2,365,587 2,440,254 Capital ￦ 167,456 167,456
Investment property 10,822 5,598 Capital surplus 356,556 266,516
Intangible assets 14,251 14,931 Capital adjustment (40,372) (40,372)
Investments in associates and joint ventures 588,428 487,906 Accumulated other comprehensive income (60,886) 46,075
Available-for-sale financial assets - 255,710 Retained earnings 1,924,565 1,402,981
Financial assets at fair value through other comprehensive income 241,704 - 2,347,319 1,842,656
Financial assets at fair value through profit or loss 8,768 -
Loans and other receivables 24,898 26,007 Non-controlling interests 828 114,147
Deferred tax assets 9,143 12,029 TOTAL EQUITY 2,348,147 1,956,803
Other non-current assets 4,407 4,710
3,268,008 3,247,145 LIABILITIES
Non-current liabilities
Current assets Other payables 4,552 4,963
Inventories 471,643 426,750 Long-term accrued expenses 5,430 4,545
Financial assets at fair value through profit or loss 170 142 Borrowings 371,732 583,112
Derivative financial assets 383 - Liabilities for defined benefit plans 39,217 35,209
Trade receivables 636,967 588,512 Deferred tax liabilities 88,055 77,465
Loans and other receivables 128,519 48,437 Financial guarantee liabilities 111 117
Cash and cash equivalents 101,805 234,430 Derivative financial liabilities 540 3,679
Non-current assets held for sale - 25,622 Provision 16 15
Other current assets 9,225 8,776 509,653 709,105
1,348,712 1,332,669
TOTAL ASSETS ￦ 4,616,720 4,579,814 Current liabilities
Trade payables 319,051 398,184
Other payables 234,991 225,375
Borrowings 1,085,313 1,226,014
Current tax liabilities 97,865 38,990
Derivative financial liabilities - 7,149
Provisions 8,948 5,916
Other current liabilities 12,752 12,278
1,758,920 1,913,906
TOTAL LIABILITIES 2,268,573 2,623,011
TOTAL EQUITY AND LIABILITIES ￦ 4,616,720 4,579,814
80 81
KUMHO PETROCHEMICAL CO., LTD. AND SUBSIDIARIES KUMHO PETROCHEMICAL CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2018 and 2017 For the years ended December 31, 2018 and 2017
In millions of won, except earning per share information In millions of won
2018 2017 2018 2017
Sales ￦ 5,584,911 5,064,779 Net profit for the year ￦ 503,082 217,647
Cost of sales 4,854,226 4,636,527
Gross profit 730,685 428,252 Other comprehensive income (loss) for the year, net of income tax (18,009) 33,282
1. Items that will not be reclassified subsequently to profit or loss :
Selling, general and administrative expenses 176,052 165,626 Remeasurements of net defined benefit liability (11,652) 5,031
Operating income 554,633 262,626 Net change in fair value of financial assets (6,234) -
Other income 51,009 53,072 2. Items that will be reclassified subsequently to profit or loss :
Other expenses 43,973 87,496 Net change in fair value of available-for-sale financial assets - 33,997
Financial income 26,168 76,868 Foreign currency translation differences for foreign operations (197) (2,867)
Financial expenses 89,011 104,371 Effective portion of changes in fair value of cash flow hedges 43 427
Share of profit of equity accounted investees 118,084 89,089 Net change in unrealized gain on valuation of investments in associates (149) (2,421)
Net profit before income tax 616,910 289,788 Net change in retained earnings of investments in associates 180 (885)
Total comprehensive income for the year ￦ 485,073 250,929
Income tax expense 113,828 72,141
Net profit for the year ￦ 503,082 217,647 Total comprehensive income attributable to:
Owners of the Group ￦ 472,607 245,031
Profit attributable to: Non-controlling interests 12,466 5,898
Owners of the Group 491,221 213,577 Total comprehensive income for the year ￦ 485,073 250,929
Non-controlling interests 11,861 4,070
Net profit for the year ￦ 503,082 217,647
Earnings per share (In Korean won) :

Basic and diluted earnings per share(common stock) 17,597 7,647
Basic and diluted earnings per share(preferred stock) ￦ 17,597 7,727
82 83
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended December 31, 2018 and 2017
Accumulated Accumulated
Non- Non-
Capital Capital other Retained Total Capital Capital other Retained Total
Capital controlling Capital controlling
surplus adjustment comprehensive earnings equity surplus adjustment comprehensive earnings equity
interests interests
income income
Balance at January 1, 2017 ￦ 167,456 266,517 (40,358) 18,198 1,207,923 108,165 1,727,901 Balance at January 1, 2018 ￦ 167,456 266,516 (40,372) 46,075 1,402,981 114,147 1,956,803
Total comprehensive income Changes in accounting policies - - - (92,911) 92,154 (40) (797)
for the year
Balance at January 1, 2018
167,456 266,516 (40,372) (46,836) 1,495,135 114,107 1,956,006
Net profit for the year - - - - 213,577 4,070 217,647 after applying changes
Net change in fair value of Total comprehensive income

- - - 32,488 - 1,509 33,997
available-for-sale financial assets for the year
Foreign currency translation Net profit for the year - - - - 491,221 11,861 503,082
- - - (2,874) - 7 (2,867)
differences for foreign operations
Foreign currency translation
- - - (197) - - (197)
Effective portion of changes in differences for foreign operations
- - - 433 - (6) 427
fair value of cash flow hedges
Effective portion of changes in
- - - 56 - (13) 43
Net change in unrealized gain fair value of cash flow hedges
on valuation of investments in - - - (2,170) - (251) (2,421)
Net change in unrealized gain
associates
on valuation of investments in - - - (330) - 181 (149)
Net change in retained earnings associates
- - - - (885) - (885)
of investments in associates
Net change in retained earnings
- - - - 180 - 180
Remeasurements of net defined of investments in associates
- - - - 4,461 570 5,031
benefit liability
Remeasurements of net defined
- - - - (11,843) 191 (11,652)
Transactions with benefit liability
owners of the Group, Net change in fair value of
recognized directly in equity - - - (13,579) 7,099 246 (6,234)
available-for-sale financial assets
Additional acquisition of shares of Transactions with
- (1) (14) - - 83 68
subsidiaries owners of the Group,
Dividends - - - - (22,095) - (22,095) recognized directly in equity
Balance at December 31, 2017 ￦ 167,456 266,516 (40,372) 46,075 1,402,981 114,147 1,956,803 Additional acquisition of shares of
- 60,111 - - - (125,745) (65,634)
subsidiaries
Writing down subsidiary’s treasury

- 29,929 - - (29,929) - -
stocks
Dividends - - - - (27,298) - (27,298)
Balance at December 31, 2018 ￦ 167,456 356,556 (40,372) (60,886) 1,924,565 828 2,348,147
84 85
CONSOLIDATED STATEMENTS OF CASH FLOWS
2018 2017 2018 2017
Cash flows from operation activities: Cash flows from financing activities:
Cash generated from operation activities ￦ 578,693 488,542 Net proceeds(repayments) of short-term borrowings ￦ (81,415) (59,747)
Interest received 2,959 1,730 Proceeds from issuance of bonds 69,720 217,905
Interest paid (59,085) (64,850) Proceeds from long-term borrowings 17,300 147,540
Dividends received 23,001 16,457 Repayments of current portion of long-term borrowings (350,287) (541,476)
Income tax paid (60,918) (20,832) Repayments of long-term borrowings (10,095) (15,612)
Net cash provided by operating activities 484,650 421,047 Repayments of other payables (309) (220)
Payments of derivative instruments (7,135) (3,034)
Cash flows from investing activities: Dividends paid (27,298) (22,094)
Increase in short-term financial instruments (82,000) (4,000) Capital increase from non-controlling interests - 84
Proceeds from sales of short-term financial instruments - 14,000 Increase of parent’s ownership interests (36,887) -
Increase in long-term financial instruments - (10,598) Payment for share issuance costs - (22)
Proceeds from sales of long-term financial instruments 232 3 Net cash used in financing activities (426,406) (276,676)
Increase in long-term loans (499) (383)
Collection of long-term loans 261 211 Effect of exchange rate fluctuations on cash held (188) (895)
Acquisition of property, plant and equipment (134,109) (105,974) Net increase(decrease) in cash and cash equivalents (132,625) 37,453
Sales of property, plant and equipment 5,496 5,182 Cash and cash equivalents at the beginning of year 234,430 196,977
Receipts of insurance 846 - Cash and cash equivalents at the end of year ￦ 101,805 234,430
Acquisition of intangible assets (1,369) (832)
Sales of intangible assets 1,760 79
Acquisition of available-for-sale financial assets - (3,400)
Sales of available-for-sale financial assets - 72
Sales of financial assets at fair value through OCI 18,716 -
Acquisition of other investments (15) (370)
Increase in cash due to change in scope of consolidation - (13)
Net cash used in investing activities ￦ (190,681) (106,023)
86 87
KUMHO PETROCHEMICAL CO., LTD. In preparing the separate financial statements, management is responsible for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to
INDEPENDENT AUDITORS’ REPORT liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Based on a report originally issued in Korean
AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE SEPARATE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whole are free from material misstatement,
To the Shareholders and Board of Directors of whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists. Misstatements can arise from
Kumho Petrochemical Co., Ltd.
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these separate financial statements.
OPINION
We have audited the separate financial statements of Kumho Petrochemical Co., Ltd.(the “Company”), which comprise the separate statements of As part of an audit in accordance with KSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
financial position as of December 31, 2018 and 2017, the separate statements of income, comprehensive income, changes in equity and cash flows
• Identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures
for the years then ended, and notes, comprising significant accounting policies and other explanatory information.
responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of the Company misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
as of December 31, 2018 and 2017, and its separate financial performance and its separate cash flows for the years then ended in accordance with the override of internal control.
Korean International Financial Reporting Standards(“K-IFRS”). • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. But it is not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control.
BASIS FOR OPINION • Evaluate the appropriateness of accounting policies used in the preparation of the separate financial statements and the reasonableness of accounting estimates
We conducted our audits in accordance with Korean Standards on Auditing(“KSAs”). Our responsibilities under those standards are further described in and related disclosures made by management.
the Auditors’ Responsibilities for the Audit of the Separate Financial Statements section of our report. We are independent of the Company in accordance
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material
with the ethical requirements that are relevant to our audit of the separate financial statements in Republic of Korea, and we have fulfilled our other
uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that
ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the separate financial statements or, if such
provide a basis for our opinion.
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future
events or conditions may cause the Company to cease to continue as a going concern.
KEY AUDIT MATTERS
• Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the separate financial statements of the statements represent the underlying transactions and events in a manner that achieves fair presentation.
current period. These matters were addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
(1) Appropriateness of disclosure of transactions and balances associated with related parties
As described in Note 29(Related Parties), due to the many related parties, there may be a possibility of error in appropriate disclosure of transactions We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence,
and balances associated with related parties. So, we identified the appropriate disclosure of transactions and balances associated with related and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
parties as significant risk in the audit. related safeguards.
Audit procedures we performed responsive to this risk are as follows; From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the
separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless
• We inspected documents such as minutes of meeting of shareholders and of board of directors to obtain evidence whether there are transactions and
law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
balances with related parties that the Company has not identified and disclosed.
communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
• We compared the disclosures about related parties with related party relationships and transactions identified by the Company. such communication.
• We compared the disclosures about related parties with related party relationships and transactions audited by component auditors.
The engagement partner on the audit resulting in this independent auditors’ report is Kwonsuk Lee.
• We performed analytical procedures on information about transactions and balances associated with related parties for the years ended December 31, 2018
and 2017.
• We inspected contracts related to transactions associated with related parties that include significant changes.
• We performed external confirmation procedures for significant balances.
Seoul, Korea
OTHER MATTER
March 13, 2019
The procedures and practices used in the Republic of Korea to audit such separate financial statements may differ from those generally accepted and
applied in other countries.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE SEPARATE FINANCIAL STATEMENTS This report is effective as of March 13, 2019, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report
date and the time of reading this report, could have a material impact on the accompanying separate financial statements and notes thereto. Accordingly,
Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with K-IFRS, and for such
the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or
internal control as management determines that is necessary to enable the preparation of separate financial statements free from material misstatement,
circumstances, if any.
whether due to fraud or error.
88 89
KUMHO PETROCHEMICAL CO., LTD.
SEPARATE STATEMENTS OF FINANCIAL POSITION
As of December 31, 2018 and 2017
2018 2017 2018 2017
ASSETS EQUITY
Non-current assets Capital ￦ 167,456 167,456
Property, plant and equipment ￦ 1,578,994 1,684,229 Capital surplus 276,206 276,206
Investment property 35,887 - Capital adjustment (40,066) (40,066)
Intangible assets 10,557 11,101 Accumulated other comprehensive income (52,546) 45,854
Investments in subsidiaries, associates and joint ventures 414,436 415,610 Retained earnings 1,166,797 932,066
Available-for-sale financial assets - 227,916 TOTAL EQUITY 1,517,847 1,381,516
Financial assets at fair value through other comprehensive income 238,872 -
Financial assets at fair value through profit or loss 2,135 - LIABILITIES
Loans and other receivables 11,957 13,021 Non-current liabilities
Deferred tax assets 6,289 7,111 Other payables 4,570 4,981
Other non-current assets 786 786 Borrowings 228,813 350,167
2,299,913 2,359,774 Long-term accrued expenses 4,550 3,748
Liabilities for defined benefit plans 33,053 25,897
Current assets Financial guarantee liabilities 111 117
Inventories 341,422 328,842 Derivative financial liabilities 172 1,987
Derivative financial assets 383 - 271,269 386,897
Trade receivables 401,345 431,908
Loans and other receivables 30,383 29,546 Current liabilities
Cash and cash equivalents 62,830 198,147 Trade payables 230,635 316,695
Non-current assets held for sale - 25,622 Other payables 151,601 172,766
Other current assets 5,003 4,600 Borrowings 917,482 1,066,250
841,366 1,018,665 Derivative financial liabilities - 7,149
TOTAL ASSETS ￦ 3,141,279 3,378,439 Current tax liabilities 39,287 37,939
Provisions 4,128 968
Other current liabilities 9,030 8,259
1,352,163 1,610,026
TOTAL LIABILITIES 1,623,432 1,996,923
TOTAL EQUITY AND LIABILITIES ￦ 3,141,279 3,378,439
90 91
KUMHO PETROCHEMICAL CO., LTD. KUMHO PETROCHEMICAL CO., LTD.
SEPARATE STATEMENTS OF INCOME SEPARATE STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2018 and 2017 For the years ended December 31, 2018 and 2017
In millions of won, except earning per share information In millions of won
2018 2017 2018 2017
Sales ￦ 3,899,573 3,926,051 Net profit for the year ￦ 182,630 135,422
Cost of sales 3,464,660 3,567,608
Gross profit 434,913 358,443 Other comprehensive income (loss) for the year, net of income tax (19,001) 31,824
1. Items that will not be reclassified subsequently to profit or loss :
Selling, general and administrative expenses 149,848 142,092 Remeasurements of net defined benefit liability (10,189) 2,990
Operating income 285,065 216,351 Net change in fair value of financial assets (8,918) -
Other income 44,117 48,099 2. Items that will be reclassified subsequently to profit or loss :
Other expenses 30,454 65,994 Net change in fair value of available-for-sale financial assets - 28,385
Financial income 18,604 69,134 Effective portion of changes in fair value of cash flow hedges 106 449
Financial expenses 67,539 84,193 Total comprehensive income for the year ￦ 163,629 167,246
Net profit before income tax 249,793 183,397
Income tax expense 67,163 47,975

Net profit for the year ￦ 182,630 135,422
Earnings per share (In Korean won) :

Basic and diluted earnings per share(common stock) ￦ 6,536 4,845
Basic and diluted earnings per share(preferred stock) ￦ 6,631 4,926
92 93
SEPARATE STATEMENTS OF CHANGES IN EQUITY
Accumulated Accumulated
Capital Capital other Retained Total Capital Capital other Retained Total
Capital Capital
surplus adjustment comprehensive earnings equity surplus adjustment comprehensive earnings equity
income income
Balance at January 1, 2017 ￦ 167,456 276,206 (40,066) 17,020 815,749 1,236,365 Balance at January 1, 2018 ￦ 167,456 276,206 (40,066) 17,020 815,749 1,236,365
Total comprehensive income Changes in accounting policies - - - (89,588) 89,588 -
for the year
Balance at January 1, 2018
167,456 276,206 (40,066) (43,734) 1,021,654 1,381,516
Net profit for the year - - - - 135,422 135,422 after applying changes
Net change in fair value of Total comprehensive income

- - - 28,385 - 28,385
available-for-sale financial assets for the year
Effective portion of changes in Net profit for the year - - - - 182,630 182,630
- - - 449 - 449
fair value of cash flow hedges
Net change in fair value of
- - - (8,918) - (8,918)
Remeasurements of net defined financial assets
- - - - 2,990 2,990
benefit liability
Effective portion of changes in
- - - 106 - 106
Transactions with owners of the fair value of cash flow hedges
Company, recognized directly in equity
Remeasurements of net defined
- - - - (10,189) (10,189)
Dividends - - - - (22,095) (22,095) benefit liability
Balance at December 31, 2017 ￦ 167,456 276,206 (40,066) 45,854 932,066 1,381,516 Transactions with owners of the
Company, recognized directly in equity
Dividends - - - - (27,298) (27,298)
Balance at December 31, 2018 ￦ 167,456 276,206 (40,066) (52,546) 1,166,797 1,517,847
94 95
SEPARATE STATEMENTS OF CASH FLOWS
2018 2017 2018 2017
Cash flows from operation activities Cash flows from financing activities
Cash generated from operation activities ￦ 323,047 374,481 Net proceeds(repayments) of short-term borrowings (135,481) (34,907)
Interest received 1,594 957 Proceeds from issuance of bonds 69,720 144,562
Interest paid (44,886) (48,887) Proceeds from long-term borrowings 9,500 118,300
Dividends received 14,957 11,006 Repayments of current portion of long-term borrowings (215,756) (439,078)
Income tax paid (58,927) (18,491) Payments of derivative instruments (7,135) (3,034)
Net cash provided by operating activities 235,785 319,066 Repayments of other payables (309) (220)
Dividends paid (27,298) (22,094)
Cash flows from investing activities Net cash used in financing activities (306,759) (236,471)
Increase in long-term loans (325) (213)
Collection of long-term loans 242 187 Effect of exchange rate fluctuations on cash held 9 (496)
Increase in short-term financial instruments (5,000) - Net increase(decrease) in cash and cash equivalents (135,317) 31,735
Acquisition of property, plant and equipment (66,502) (49,565) Cash and cash equivalents at the beginning of year 198,147 166,412
Sales of property, plant and equipment 5,478 4,735 Cash and cash equivalents at the end of year ￦ 62,830 198,147
Acquisition of intangible assets (1,019) (672)
Sales of intangible assets 1,600 68
Acquisition of investments in subsidiaries and associates (6,958) (2,076)
Sales of investments in subsidiaries and associates 8,132 -
Acquisition of available-for-sale financial assets - (2,900)
Sales of available-for-sale financial assets - 72
Net cash used in investing activities ￦ (64,352) (50,364)
96 97
CORPORATE HISTORY
1970s-1980s 1990s 2000s 2010s

• December 1970 • April 1992 • October 2000 • February 2011 • July 2015 • April 2018
Established as Korea Synthetic Rubber Commissioned Ulsan BD plant Established Shanghai Kumho Sunny Commissioned second Yeosu synthetic Korea Energy Power wind turbines 3, 4 Acquired all shares of Kumho P&B
Industries Co., Ltd. Plastics, China rubbers plant and 5 begin commercial operations Chemicals owned by Nippon Steel &
• July 1993 Sumikin Chemical to change KKPC
• June 1973 Opened office in Jakarta, Indonesia • January 2001 • March 2011 • July 2015 ownership from 78.2% to 100% by seeing
Commissioned Ulsan SBR plant Merged with Kumho Chemicals, Inc. Commissioned Yesan building materials Acquired Korea Energy Power wind retirement of treasury stock as retained
• April 1994 (Synthetic resins) plant turbine 6 earnings
• October 1979 Opened Kumho Chemical Laboratories
Commissioned Yeosu BD plant in Daejeon, Korea • January 2002 • December 2011 • October 2015 • May 2018
Merged with Kumho Monsanto Co., Ltd.
Received the USD 3 Billion Export Tower Acquired 32.5% equity stake in Completed 16,000-ton expansion of ABS
• June 1980 • August 1994 (Specialty chemicals)
Award from the Ministry of Knowledge Yeonggwang Baeksu wind farm powder
Commissioned Yeosu BR plant Launched SBS production
Economy
• February 2002
• October 2015 • December 2018
• December 1983 • May 1997 Opened office in Frankfurt, Germany
• September 2012 Completed Shanghai Kumho Sunny Acquired an additional 5% of the Kumho
Commissioned Ulsan SB latex plant Changed Miwon Petrochemical Co., Ltd.
Relocated Seoul headquarters Plastics Minhang plant Terminal & Logistics shares to change
name to Kumho Chemicals, Inc. • October 2004
KKPC ownership from 95% to 100%
• June 1985 Launched commercial production
• May 2013 • March 2016
Merged with Korea Kumho Chemical Co., • July 1997 at Yeosu SSBR plant
Ltd. and changed corporate name to Commissioned Yeosu Energy I Purchased equity stake in Korea Energy Opened office in Kuala Lumpur, Malaysia
Kumho Petrochemical Co., Ltd. cogeneration plant • November 2005 Power in Sacheon, Korea (Solar power)
Received the USD 1 Billion Export Tower • April 2016
• June 1985 • September 1997 Award from the Ministry of Commerce, • October 2013 Recognized as a major business
Established Kumho Petrochemical Opened office in Shanghai, China Industry and Energy Commissioned carbon nanotube plant conglomerate by the Korean government
Research Center in Asan, Korea
• December 1997 • September 2006 • April 2016
• January 1988 Opened office in San Diego, USA Established Nanjing Kumho GPRO • December 2013 Commissioned Yeosu Energy II
Listed on the Korea Stock Exchange Chemical, China Launched commercial production cogeneration plant expansion
• April 1998 at Asan carbon nanotube plant
• November 1988 Commissioned Yeosu SBS plant • June 2007 • August 2016
Commissioned Yeosu multi-purpose Established Rizhao Kumho Jinma • July 2014 Completed 200,000 mtpy expansion of
BR plant • October 1998 Chemical, China Completed 55,000 mtpy expansion of the Ulsan NB latex plant
Commissioned Asan electronic materials Ulsan PPG plant
plant • June 2007 • August 2016
Opened office in Qingdao, China • May 2015 Acquired 100% equity stake in Kangwon
Participated in Korea Energy Power capital School Solar Power through subsidiary
• December 2008
increase (92.6% equity stake) Korea Energy Power
Received the USD 2 Billion Export Tower
Award from the Ministry of Knowledge
• June 2015 • September 2017
Economy
Yeonggwang Baeksu wind farm begins Opened office in Atlanta, USA
commercial operations
• May 2009
Commissioned Yeosu Energy II
cogeneration plant
• September 2009
Established Kumho Terminal & Logistics
98 99
CHEMICAL AFFILIATES
Kumho P&B Kumho Mitsui Kumho Polychem Kumho Terminal and Korea Energy Power
Chemicals, Inc. Chemicals, Inc. Co., Ltd. Logistics Co., Ltd. Co., Ltd.
Kumho P&B Chemicals is a wholly owned subsidiary of KKPC. It Established in 1989, Kumho Mitsui Chemicals is an industry leader Kumho Polychem was founded in 1985 to Established in September 2009, Kumho Korea Energy Power was established to
specializes in producing and selling key materials used in construction, in the production and sales of MDI, the main feedstock used in the produce and sell EPDM, a synthetic rubber Terminal & Logistics is a dedicated logistics engage in the solar PV generation business.
shipbuilding, automobile, electric, electronics, pharmaceutical and paint production of polyurethane (PU). MDI is an advanced chemical widely used in automotive parts and industrial base for bituminous coal and other raw The company installed a solar PV plant in
industries, including BPA, phenol, acetone, epoxy resin and MIBK. The product, used extensively across diverse product groups, including goods, as well as applied products, such materials, for companies including Korea Sacheon, Korea, and began commercial
company launched its phenol and acetone businesses in 1976, and car seats and dashboards, refrigerator insulation, construction panels, as TPV and KEPA. The company is Asia’s South-East Power and Korea East-West power generation in July 2013. At the time, this
has since continued to innovate and expand, and now supplies high- synthetic wood, synthetic leather, spandex and sneaker soles. Demand No. 1 EPDM manufacturer, and has been Power as well as KKPC’s Yeosu Energy plant was the largest regional rooftop solar
quality products to industries in Korea that had previously depended for MDI continues to rise, and so the company completed a 100,000- contributing to the stability of supply and cogeneration plants in the Yeosu National project in Korea. The company generates
on imports. It exports a significant amount of its production, and has ton expansion construction project in the second half of 2017, which demand in the domestic and overseas EP Industrial Complex, to ensure stable supply revenues through sales of electricity and
achieved considerable growth through the continued expansion of has increased overall capacity to 350,000 tons, the largest MDI rubber markets, as well as to the development of raw materials. By operating a sealed renewable energy certificates (REC) at the
production facilities. The company will continue to develop cutting- production capacity in Korea. In addition, Kumho Mitsui Chemicals has of the Korean automotive industry. In July 2007, system for bituminous coal storage facilities, Korea Power Exchange. Including affiliates,
edge technologies and eco-friendly, highly-functional new materials been developing new businesses, including commercial production Kumho Polychem became the first company the company not only reduces logistics such as Cheoldo Solar and Kangwon School
even in a rapidly changing competitive environment. It will also actively of phosgene derivatives (IPC), while continuing to put extra efforts into in the world to successfully complete a plant costs but also becomes more eco-friendly. Solar Power, the company’s total installed
invest in the environment and safety, and continue to expand capacity quality management as well as environmental and safety management. expansion that included a proprietary ultralow In addition to port cargo handling and capacity is 31.4 MWh. Korea Energy Power’s
to become a leader in the international phenol and derivatives market, As the company makes active inroads into overseas markets, it will temperature polymerization technology. With storage, Kumho Terminal & Logistics also plants produce 44,000 MWh of electricity
thereby improving its customer value through the industry’s highest become a global PU producer. the completion of its second plant in June provides inland transportation services for annually, which can be supplied to around
quality and greatest technological prowess. 2015, it became the world’s No. 4 EPDM bituminous coal. The company aims to 10,600 homes, thus contributing to the supply
manufacturer, with an annual production become a comprehensive logistics company of clean electricity to regions throughout
capacity of 220,000 tons. In 2011, its EPDM by supporting its customers at all times and Korea. In addition, by achieving a CO2
was selected as a world-class product by expanding its business areas to include a full reduction of more than 18,100 tons annually,
the Ministry of Knowledge Economy, and array of logistics services. the company is contributing to environmental
the company itself was also recognized as a preservation. KKPC plans to strengthen
manufacturer of a world-class product. The and expand its new and renewable energy-
company also continues to strengthen its related businesses in Korea and overseas,
R&BD activities, including the establishment of including wind power, fuel cell, energy storage
the Daejeon Research Center, thus reinforcing system (ESS) and biofuel, beginning with PV
its position as a leading global producer of generation in Korea.
EPDM.
2018 SALES 2018 SALES 2018 SALES 2018 SALES 2018 SALES
KRW 1,800.2 billion KRW 908.0 billion KRW 476.8 billion KRW 56.0 billion KRW 3.4 billion
2018 NET INCOME 2018 NET INCOME 2018 NET INCOME 2018 NET INCOME 2018 NET INCOME
KRW 188.0 billion KRW 200.4 billion KRW -5.1 billion KRW 4.5 billion KRW 0.8 billion
KKPC OWNERSHIP www.kpb.co.kr KKPC OWNERSHIP www.kmci.co.kr KKPC OWNERSHIP www.kumhopolychem. KKPC OWNERSHIP www.ktnl.co.kr KKPC OWNERSHIP
co.kr/kor
100% 50.0% 50.0% 100% 96.1%
100 101
GLOBAL PARTNERSHIPS
Shanghai Kumho Sunny Nanjing Kumho GPRO Rizhao Kumho Kumho Petrochemical
Plastics Co., Ltd. Chemical Co., Ltd. Jinma Chemical Co., Ltd. Shanghai Co., Ltd.
PURPOSE PURPOSE PURPOSE PURPOSE

Secure a base for local production, sales and distribution in China; Achieve market dominance in Chinese polyurethane market Achieve market dominance in Chinese paper latex market Increase sales and profitability by establishing a base to expand
Increase sales of colored and specialized products that meet the business areas in China
changing demands of the ABS market; and Increase sales of base resins
KEY PRODUCTS KEY PRODUCTS KEY PRODUCTS KEY PRODUCTS

Heat-resistant ABS for automotive parts, heat-resistant ABS for electrical Propylene oxide (PO), polypropylene glycol (PPG), caustic soda (CS) SB latex Synthetic rubbers (SBR, BR), synthetic resins (ABS, PS), products of
and electronic products chemical affiliates (EPDM, MDI, epoxy resin), products of joint ventures
in China (PPG)
LOCATION LOCATION LOCATION LOCATION

Shanghai, China Nanjing, China Rizhao, China Shanghai, China
ESTABLISHMENT ESTABLISHMENT ESTABLISHMENT ESTABLISHMENT

October 19, 2000 September 28, 2006 June 8, 2007 May 19, 2008
2018 SALES 2018 SALES 2018 SALES 2018 SALES
RMB 2.08 billion RMB 1.22 billion RMB 0.48 billion RMB 22.32 million (commission)
KKPC OWNERSHIP KKPC OWNERSHIP KKPC OWNERSHIP KKPC OWNERSHIP
50% through Kumho Petro-Holdings (HK) 50% through Kumho Petro-Holdings (HK) 100% through Kumho Petro-Holdings (HK)
50.0% 50.0% 50.0% 100%
Shanghai Nanjing Rizhao Shanghai
102 103
GLOBAL NETWORK
Overseas
01 Kumho Petro-Holdings (H.K.) Co., Ltd. 04 Rizhao Kumho Jinma Chemical Co., Ltd. 07 Qingdao Office 10 Jakarta Office
Room 1806-08, 18/F, Tower II, Admiralty Centre, Taoluo Industrial Park, Donggang District, Rizhao, 1704-05, Haihang Wanbang Center, No. 234, Yan An San Road, Menara Jamsostek 3rd Floor, JI. Jend. Gatot Subroto Kav,
18 Harcourt Road, Admiralty, Hong Kong Shandong 276805, China Qingdao 266071, China 38 Jakarta Selatan 12710, Indonesia
Tel: +852-2528-9899 Tel: +86-633-867-7817 Tel: +86-532-8503-0002 Tel: +62-21-522-8174
Fax: +852-2804-1004 Fax: +86-633-867-7887 Fax: +86-532-8503-0023 Fax: +62-21-522-8184
02 Shanghai Kumho Sunny Plastics Co., Ltd. 05 Kumho Petrochemical Shanghai Co., Ltd. 08 San Diego Office 11 Frankfurt Office
No. 1399, Jigao Road, Huacao Town, Minhang District, Rm 2606-2608, Tower B, City Center of Shanghai, No. 100, 8799 Balboa Ave, Suite 110, San Diego, CA 92123, USA Lyoner Strasse 34, 60528 Frankfurt am Main, Germany
Shanghai 201107, China Zun Yi Road, Shanghai 200051, China Tel: +1-858-987-0023 Tel: +49-69-6605-9985
Tel: +86-21-6296-9608 Tel: +86-21-6237-1835 Fax: +1-858-987-0062 Fax: +49-69-6605-9986
Fax: +86-21-6296-9622 Fax: +86-21-6237-1838
09 Atlanta Office 12 Kuala Lumpur Office
03 Nanjing Kumho GPRO Chemical Co., Ltd. 06 Guangzhou Office 3675 Crestwood Parkway, Suite 250, Duluth, GA 30096, USA Lot 12-03, Level 12, Block B, HP Towers, No. 12, Jalan
No. 139, Fenghua Road, Nanjing Chemical Industry Park, Suite 3704, Taikoo Hui Tower 1, 385 Tianhe Road, Tel: +1-770-559-9506 Genlenggang, Bukit Damansara 50490 Kuala Lumpur, Malaysia
Luhe District, Nanjing 210047, China Tianhe District, Guangzhou 510620, China Fax: +1-770-674-7914 Tel: +60-3-2011-1813
Tel: +86-25-5830-0818 Tel: +86-20-3839-9615 Fax: +60-3-2011-1816
Fax: +86-25-5830-0900 Fax: +86-20-3839-9710
11
09
08
04 07
03 02
06 01 05
12
10
104 105
Domestic
13 Seoul Head Office 17 Yeosu Synthetic Rubber Plant II 21 Asan Electronic Materials Plant
Signature Towers Seoul, 100 331 Sandanjungang-ro, 958 Oncheondae-ro, Shinchang-myeon,
Cheonggyecheon-ro, Jung-gu, Yeosu, Jeollanam-do, Korea Asan, Chungcheongnam-do, Korea
Seoul, Korea Tel: +82-61-688-3000 Tel: +82-41-423-3110
Tel: +82-2-6961-1114 Fax: +82-61-688-3166 Fax: +82-41-423-3199
Fax: +82-2-6961-1449
18 Yeosu Specialty Chemicals Plant 22 Yesan Building Materials Plant
14 Ulsan Synthetic Rubber Plant 227 Yeosusandan-2-ro, 1033-9 Yedeok-ro, Godeok-myeon,
64 Sanggae-ro, Nam-gu, Ulsan, Korea Yeosu, Jeollanam-do, Korea Yesan,
Tel: +82-52-259-6114 Tel: +82-61-688-3000 Chungcheongnam-do, Korea
Fax: +82-52-275-6547 Fax: +82-61-688-3166 Tel: +82-41-330-8640
Fax: +82-41-330-8699
15 Ulsan Synthetic Resin Plant 19 Yeosu Energy I
260-257 Cheoyong-ro, Nam-gu, 46-51 Yeosusandan-2-ro, 23 Hwaseong Foam Plant
Ulsan, Korea Yeosu, Jeollanam-do, Korea 1093 Baran-ro, Jeongnam-myeon,
www.kkpc.com
Tel: +82-52-279-8600 Tel: +82-61-688-3000 Hwaseong, Gyeonggi-do, Korea
Fax: +82-52-273-1148 Fax: +82-61-688-3166 Tel: +82-31-831-6600
Fax: +82-31-831-6619
16 Yeosu Synthetic Rubber Plant I 20 Yeosu Energy II
118 Yeosusandan-3-ro, Yeosu, 223-84 Yeosusandan-2-ro, Y 24 R&BD Center
Jeollanam-do, Korea eosu, Jeollanam-do, Korea 1557 Yuseongdae-ro, Yuseong-gu,
Tel: +82-61-688-3000 Tel: +82-61-688-3000 Daejeon, Korea
Fax: +82-61-688-3166 Fax: +82-61-688-3166 Tel: +82-42-865-8600
Fax: +82-42-862-5651
13
23
21
22 24
14 15
19 20
16 17 18
106
KUMHO PETROCHEMICAL
ANNUAL REPORT 2018
K-Principles
Signature Towers Seoul
100 Cheonggyecheon-ro, Jung-gu, Seoul, Korea
EN

Kumho Petrochemical Annual Report 3035a

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Kumho Petrochemical Annual Report 3035a

Uploaded by

Copyright:

Available Formats

ANNUAL REPORT 2018

consistently defined the markets in which we operate. KKPC stands for

INCOME STATEMENTS GROWTH PROFITABILITY STABILITY

3,970.4 5,064.7 5,584.9 157.1 262.6 554.6 4,546.1 4,579.8 4,616.7

Operating Income 554.6 262.6 292.0

Income before Income Tax 616.9 289.8 327.1

Net Income 503.1 217.6 285.5

Net Financing Cost 62.8 27.6 35.2

2016 2017 2018 2016 2017 2018 2016 2017 2018

Total Liabilities 2,268.6 2,623.0 -354.4

Total Equity 2,348.1 1,956.8 391.3

SALES BREAKDOWN & EXPORT BY REGION

KEY FINANCIAL RATIOS

2018 2017 Change (%p)

Operating Margin 9.9 5.2 4.7

Debt-to-Equity Ratio 96.6 134.0 37.4

Return on Equity 23.4 11.8 11.6 SYNTHETIC RUBBERS SYNTHETIC RESINS

* Based on K-IFRS consolidated financial statements

SHARE DATA STOCK PRICE MARKET CAPITALIZATION DIVIDEND

82,000 99,500 87,300 2,586,939 3,140,230 2,756,127 800 1,000 1,350

Number of Shares 33,491,177 33,491,177

Common Shares 30,467,691 30,467,691

Preferred Shares 3,023,486 3,023,486

Market Capitalization (KRW million) 2,756,127 3,140,230

Credit Rating from Korea Information Service A- A-

PER SHARE DATA

Net Income 17,597 7,647

Book Value 94,364 74,076

Dividend 1,350 1,000

Share Price STOCK PRICE IN 2018

2018 2017 2,200

Major Shareholders 24.68 24.68 85,000

We will realize our goal of becoming a ‘Global Leading

DEAR VALUED STAKEHOLDERS,

obstacles into opportunities,

Our commitment to delivering value to

FOR OUR CUSTOMERS PASSION FOR EXCELLENCE

More information is available on our website at www.kkpc.com/eng/

K-Foundation Sales (KRW billion)

2018 was a year of resilience and growth. 5,584.9

we recovered momentum for growth, 5,064.7

foundations which have enabled us to remain

the future, and to deliver balanced, profitable 26.1 42.0

and stable growth. 34.6

PROFITABLE GROWTH STABLE GROWTH

SBS – Newly selected as a world-class product

KKPC responds decisively to market conditions

KNL 834 – Launching a new NB latex product

SSBR – Adding values to tires

Display technologies for future growth

New milestones in PR for

LEADING MARKET BY READING THE MARKET

PRODUCTION CAPACITY EXPANSION

No. 1 in the world No. 1 Korea

2018 2019(E) 2018 2019(E) 2018 2021(E) 2018 2019(E)

NB LATEX 1) EPOXY RESIN2) BPA3) MDI4)

Following the reorganization of

Other measures that improve safety management include comprehensive safety

ZERO ACCIDENT STATUS AT KKPC

21x 10x 10x 5x 1x

Our green policy consists of considering all EHS processes, continuous

ENVIRONMENTAL VISION SYSTEM

Environmental Vision Mid-to Long-term Strategy

PERFORMANCE - Incentive system rewards

- Commercialized NB R&BD ORGANIZATION KUMHO ELECTRONIC MATERIALS LABORATORY • HBR