Fine Creation

Fine Creation For the Future

ANNUAL REPORT 2012

25th Fl., Samsung Electronics Bldg.,Seochodaero No.74-gil 11 (1320-10, Seocho-2-dong),Seocho-gu, Seoul, South Korea(135-857)

Tel. + 82.2.2255.0700Fax. + 82.2.2255.0710

www.sfc.samsung.co.kr

04 PaSSioN oN MatErialS

06 SPEcial SEctioN

11 2012 SFc SNaPShot

13 ViSioN & StratEgy

14 FiNaNcial highlightS

15 cEo MESSagE

17 Board oF dirEctorS

BUSINESS REVIEW_Ever-Fine

21 gENEral chEMicalS

23 FiNE chEMicalS

25 ElEctroNic chEMical MatErialS

27 Eco-FriENdly rENEwaBlE ENErgy MatErialS

SUSTAINABILITY REVIEW_Ever-Trusty

31 rESEarch & dEVEloPMENt

33 iNNoVatioN

35 Quality MaNagEMENt

37 ENViroNMENt & SaFEty

43 huMaN rESourcES

45 Social coNtriButioNS

FINANCIAL REVIEW

48 Md&a

58 FiNaNcial StatEMENtS

69 corPoratE iNForMatioN

AN

NU

AL R

EPORT 2012


ANNUAL REPORT 2012


Tel. + 82.2.2255.0700Fax. + 82.2.2255.0710



06 SPEcial SEctioN




15 cEo MESSagE




23 FiNE chEMicalS





33 iNNoVatioN



43 huMaN rESourcES


FINANCIAL REVIEW

48 Md&a



AN

NU

AL R

EPORT 2012

Basic colors – blue and green – represent

SFc’s corporate identity and the environment.

hexagonal waves denote change, growth,

takeoff and expansion for the future.

GraphicMotif

Fine Creation for the Future, Samsung Fine Chemicals (SFC) Advanced Materials for the Future

- representing SFc’s identity as a company that produces new materials for the environment, Earth and future while pursuing technology and innovation.

- Expressing steady development that contributes to the future of mankind with blue and green which symbolize growth and the environment and the vision of taking off to become a world-leading chemical company with “advanced Materials for the Future.”

Slogan

Advanced Materials for the Future

Review of Business 1

Fine Creation For the Future Passion on Materials

The company that

produces advanced materials to enrich people’s lives and make them

more convenient. The company that produces core materials which contribute to the development of industry and technological innovation. The company that produces eco-friendly materials which protect the environment for us and our next generations. All of these are meant for SFC, an advanced material leader that pursues “Fine Creation for the Future” through steady innovation in the General Chemicals, Fine Chemicals, Electronic Chemical Materials and Eco-friendly Renewable Energy Divisions. Furthermore, SFC is a company that makes ceaseless efforts for a win-win partnership with the communities under the

pursuit of “Fine Creation for the Future.” SFC’s “Fine Creation” progresses toward steady

growth and sustainable management.

AnnuAL RePoRT 2012 2sAmsung fine ChemiCALs

AnyCoatⓇ

eCh

(epi

chlo

rohy

drin

)

mecelloseⓇ hecelloseTM

Mecellose®

SFC developed Mecellose®, an eco-friendly material,

based on cellulose from trees and raw cotton. Mecellose® is

main materials or additives for construction, paint, ceramics,

cosmetics and medicines.

Hecellose™

Hecellose™ is a water-soluble polymer for cellulose relatives.

It is an eco-friendly and highly functional material used as a thickener, moistener or stabilizer

in a variety of sectors such as paint, household items and construction.

AnyCoat®

Safety and efficacy of medicines are essential to pharmaceutical products that cure patients

and keep people healthy. SFC takes part as a reliable healthcare partner through the production of

AnyCoat®, a raw material for high-function vegetable capsules and pharmaceutical coatings.

ECH (Epichlorohydrin)

Epichlorohydrin is a key material for epoxy resins used in Korea’s

leading industries such as construction, shipbuilding and electronics.

Recently, the material is enhancing the added value of the

heavy and chemical industries while expanding its use into

the wind power generation sector.


New material technology takes lead in industrial development and makes our lives more convenient.

Ranging from environment-friendly products to materials widely used in daily lives, innovative material

technology is neither complicated nor elusive, already enriching our lives. SFC is at the center, leading the

way forward.

smart function


We spend much time on information from various electronic devices in our daily lives. The devices include

smartphones, tablet PCs, digital TVs, laptops and printers. SFC supports such IT gadgets with its state

of the art materials. SFC is truly acknowledgeable in the IT industry.

imaginative iT


TmAC

Toner for Color Laser Printer

BT Powder

Toner for Color Laser Printers

SFC developed a polymerized toner with even particles,

facilitating the production of a high-functional printer that

accommodates higher resolution images and reduces energy consumption.

TMAC

The semiconductor industry is the foundation of the IT industry. As the only producer

of TMAC in Korea, a core material of developing solutions for semiconductors and LCDs,

SFC is taking the initiative in making the IT industry become more competitive and grow further.

BT Powder

Mobile IT gadgets are very popular these days. SFC is producing BT Powder, a key material

for Multi-Layer Ceramic Capacitors (MLCCs) that makes IT devices smaller and lighter.

SELCION®(LCP)

SELCION® is a core material for high-functioning super engineering plastics,

essential in improving the functions of IT products.

SFC developed SELCION® through proprietary technology in 2007,

and is the sole supplier in Korea. The company leads the market with

differentiated competitiveness.


Polysilicon

Active materials for Rechargeable Batteries

Bio-degradable Polymer

Can we make the environment cleaner for the future generations

with plastic that is completely decomposed into water and

carbon dioxide by microbes in nature such as bacteria, mold, and algae?

SFC’s EnPol® is bio-degradable plastic that can replace conventional plastic in

areas such as agriculture, fishery, automobiles and household items.

Polysilicon

The world is facing serious problems such as pollution, climate change and the exhaustion

of natural resources caused by fossil fuels such as coal, oil and gas. SFC is preparing for the development

and mass production of high-purity polysilicon in partnership with MEMC, a US polysilicon company.

Active Materials for Rechargeable Batteries

Rechargeable batteries are the center of the Energy Storage System (ESS) that powers smartphones

and connect people. SFC is preparing to produce active materials for rechargeable lithium-ion batteries

through a joint venture with TODA Corporation, a Japanese company specializing in ceramics.

EUROX®

Numerous eco-friendly cars with high fuel efficiency have been launched,

while most cars emit exhaust fumes, becoming a major culprit behind

air pollution. EUROX® is the brand name for SFC’s Urea Solution

used to remove polluting nitrogen oxides such as

exhaust fumes from vehicles.

Bio-

degr

adab

le P

olym

er


A power plant utilizing solar energy, a car which runs without an internal-combustion engine and exhaust fumes,

and plastic that is completely decomposed into water and carbon dioxide by microbes in nature. All of these will

become realities sooner than you think. SFC wants to become a future pioneer that helps bring better

tomorrow faster with eco-friendly renewable materials.

green innovation

01.

Expanded Mecellose® Plant

SFC completed a project to elevate its Mecellose® production capacity by 8,000 tons a year in September 2012. This product is widely used as constructional and industrial additives and pharmaceutical materials. This expansion will enable SFC to preemptively deal with an increase in demand from the downstream industries and expand its marketplace through the development emerging markets.

02.

Expanded AnyCoat® Plant

In November 2012, SFC raised its annual AnyCoat® production capacity to 7,000 tons by completing new production facilities that can produce 4,000 tons a year. AnyCoat® is a raw material for highly functional pharmaceutical coatings. AnyCoat® will take the initiative in developing global markets with differentiated technologies and sufficient capacity in the steadily growing pharmaceutical industry.

03.

AnyCoat®, Hecellose™·Mecellose® Took Part in Global Trade Shows

After integrating its BI (Business Identity) and slogan in 2011, SFC actively conducted brand marketing to reinforce the awareness of all of its products. AnyCoat® took part in “CPhI Worldwide”, the biggest trade show in the pharmaceutical industry for three days from October 9 through 11 in 2012. Hecellose™ and Mecellose® promoted the company and brands, and attracted customers by taking part in “Chinacoat 2012”, one of the world’s three biggest paint coating trade shows.

2012 sfC snAPshoT

02 03

01


04.

Active Material for Secondary Cells Picked Up “Minister of Knowledge Economy Prize”

SFC’s Lithium Ferro Phosphate (LFP), an Active Material for Rechargeable Batteries, took home the “Minister of Knowledge Economy Prize” in the Nano Korea 2012 Awards in recognition of its superior heat stability and durability in August 2012. The innovative material will help SFC develop a system for continuous synthesis of uniform nanoparticles at lower cost, and reinforce its competitiveness in the

active material for the rechargeable battery sector.

05.

Hecellose™ Received 29th “IR52 Jang Yeong-Sil Prize”

Hecellose™, an eco-friendly high quality additive used in paint and shampoo, received the 29th “IR52 Jang Yeong-Sil Prize” in September 2012. The “IR52 Jang Yeong-Sil Prize” is Korea’s most authoritative prize for industrial technology established by the Korea Industrial Technology Association and the Maeil Business Newspaper. The honor was predominantly accredited with SFC’s unique technological prowess to improve productivity and save production cost of Hecellose™ by more than 30%.

06.

Selected as 2011 Excellent Company in Public Disclosures by KRX

The KRX (Korea Exchange) selected SFC as an excellent company in public disclosures by recognizing SFC’s efficient internal public disclosure infrastructure. This selection served as a chance for SFC to be recognized as a company that takes the lead in promoting sincere public disclosures and enhancing managerial transparency and reliability.

06

04 05

2012 sfC snAPshoT 9

vision& sTRATegy

BECOMING A WORLD-LEADING

CHEMICAL COMPANY

SFC is taking off to become a World-Leading Chemical Company that supplies

advanced materials and meet the needs of customers through global technological

leadership, future growth engines and ceaseless innovation. A company that

continuously changes and steadily earns trust. This is the image of a World-Leading

Chemical Company that SFC envisions.

INNOvATING CORPORATE

CULTURE

vISION

STRATEGY


- Realizing Lowest Production Cost,

Best Quality and Highest Efficiency

- Strengthening Marketing and

Sales Competitiveness

- Proactive Management Innovation Including

Advancement of Management System

- Full-scale Implementation of

New Projects for Future

- Enhancing Global Technological

Leadership

- Securing Talented People Globally

- Building Dynamic and Creative Corporate

Culture

- Establishing Constant Risk Management

System

- Building Reputation as Trustworthy Company

EXPANDING GROwTH ENGINES

REINFORCING COMPETITIvE

EDGES

finAnCiALhighLighTs

Sales In billions of KRW

FY10 FY11 FY12

1,431.2

73.3

1,333.6

73.4

1,130.6

85.1

Net Income In billions of KRW

FY10 FY11 FY12

Capex In billions of KRW

FY10 FY11 FY12

Net Debt to Equity (%)

FY10 FY11 FY12

vision & sTRATegy / finAnCiAL highLighTs 11

301.7191.8

7.6-14.6

-20.7

72.3

0

CeomessAge

BY HARNESSING CHANGE AND INNOvATION, SFC WILL PREvAIL AS A 100-YEAR-OLD COMPANY.


I would like to express my sincere gratitude on behalf of SFC for your support and

encouragement last year. The mayhem caused by the financial meltdown in the Eurozone

in 2012 had a sizable negative impact on the growth of advanced and emerging economies

and subsequently forestalled the growth of the global economy. This affected SFC as well

with a challenging business environment. Moreover, due to the chaotic state, borders among

companies and industries became blurred, ushering in an era of hyper-competition.

In amidst of these challenges, SFC posted a record-high KRW1,431.2 billion in sales and

KRW86.1 billion in earnings before taxes. These impressive results are credited to your

continued support for our company, and all of employees’ greater efforts for excellence.

By nature SFC’s business is to create customized high-value-added materials through

advanced material technology. Our mission is to create smarter life through ceaseless

innovation and advanced technology. We also stride to reach customers and the market

with better-quality products one step ahead of our competitors. In a bid to solidify cash

cow businesses, our company completed capacity expansion for Mecellose®, AnyCoat®

and Toner for Color Laser Printers, and is moving forward with facility investment on

ECH(Epichlorohydrin).

In addition, we are strengthening future growth engines that will spearhead a new paradigm

through expansion into the Eco-friendly Renewable Energy Material business including

Bio-degradable Polymers, Polysilicon, and Active Materials for Rechargeable Batteries.

On top of this, we are moving forward by reinforcing infrastructure in the mid- to long-term.

This will play a pivotal role in promoting synergies with electronic affiliates of the Samsung

Group and developing advanced materials for electronic products.

We are making steady efforts to elevate our system competitiveness with the aim of

enhancing the speed and efficiency of management by upgrading the ERP and SCM

Systems and innovating energy supply infrastructure.

The year 2012 was the first year of change and innovation for SFC that is set to celebrate

its 50th anniversary in 2014. By harnessing change and innovation, SFC will prevail as a

100-year-old company. All employees began to work in unity towards making SFC a

World-Leading Chemical Company while implementing innovation to achieve excellent

results in all sectors including business, human resources, corporate culture, and systems.

However, SFC alone cannot achieve the goals of growing into a 100-year-old company

and a World-Leading Chemical Company. The achievement will only be possible with

contributions from our employees, stakeholders, and shareholders. We will embrace all of

our employees’ innovation, overcome challenges, and meet the needs of our stakeholders

such as shareholders, customers, and partners.

Once again, we truly appreciate your strong support. SFC will step up its utmost efforts

to grow into a World-Leading Chemical Company by putting change and innovation into

practice. I hope that happiness and joy will always be with you and your family.

Thank you.

President & CEO

In-Hee Sung

Ceo messAge 13

SFC’s Board of Directors consists of inside directors with true devotion to

the company, a complete understanding of their jobs and a great sense of

responsibility, and outside directors with expertise and fairness. The BOD is

geared to leadership to promote employees’ passions and challenges and maps

out future plans.

BoARD of DiReCToRs

02.

Dong Geul Byun

· Outside Director

· Managing Partner, Yoon & Yang LLC.

01.

In Hee Sung

· President & CEO

01

02

SFC iS hArNeSSiNg iTS PASSiON TO grOw.


03.

Kyu Cheol Lee

· Outside Director

· Professor, University of Ulsan College of Engineering

04.

Gil Hwan Lee

· Executive Director

· Head of Chemicals Business Division

06.

Byung Hoon Choi

· Auditor

03

04 05

06

05.

Hee In Lee

· Executive Director

· Head of Management

Support Division

BoARD of DiReCToRs 15

BusinessReview


ever-fineDeep-rooted trees can endure strong winds

so they can bloom beautiful flowers and

produce a lot of fruit. SFC has grown into

a chemical industry leader in sectors ranging

from General Chemicals, Fine Chemicals,

Electronic Chemical Materials and

Eco-friendly and Renewable Energy Materials.

SFC’s General Chemical Division became

the linchpin of Korea’s heavy and chemical

industries while its Fine Chemical Division

helped SFC reinforce its competitiveness

and sustainable growth. Its Electronic

Chemical Material Business supplies core

materials to the IT industry.

Ever-Fine

SFC continues to make efforts to become a

strong company that can contribute to the

happiness and development of mankind

while pursuing win-win growth with local

communities and partners by producing

products that can satisfy customers.


General Chemicals

SFC began its business in 1964. Its beginning was none other than the General Chemicals

Business. The growth of its General Chemicals Business synchronizes with that of the Korean

chemical industry. The General Chemicals Business produces Caustic Soda, a basic material

for the chemical industry, Methyl Chloride used in chemical, machinery and electronic

materials, and EUROX® which removes environmental pollutants by neutralizing nitrogen oxides

in exhaust gases. Through constant innovation, cost cutting, and facility expansion in response

to increasing industrial demand, the General Chemicals Business makes SFC a strong and

stable company.

DeePLy RooTeD :



Main Products

Caustic Soda

Caustic Soda is a general chemical product that is an indispensable

material in the chemical industry. This material is used in soaps,

detergents and for metal surface treatment, water treatment, and

paper production.

Methyl Chloride

Methyl Chloride is an essential material for detergents used by

metal and electronics industries, and raw materials for refrigerants

and paint remover in the chemical, machinery and pharmaceutical

industries.

EUROX®

EUROX® is a brand name of SFC’s urea solutions that removes

polluting nitrogen oxides in exhaust gas.

2012 ReviewIn April 2011, the General Chemicals Business successfully completed its

rationalization of stopping production of Ammonia and urea-related products

with the goal of expanding the Fine Chemicals, Electronic Chemical Materials

and Eco-friendly and Renewable Energy Business. In 2012, the General

Chemicals Business experienced a year-on-year increase of 4.7% in sales on

the back of solid demand growth in Caustic Soda and EUROX®

Business Review 19


weLL gRown :


Fine Chemicals

Harnessing its strong foundation in the General Chemicals Business, SFC has expanded the

Fine Chemicals Business. The company has grown faster and more soundly thanks to stable

and profitable growth. The Fine Chemicals Business continues to build new production facilities

and expand its production capacity in line with steady growth in demand for its major products:

Mecellose®, an additive for construction; Hecellose™, an additive used in water-soluble paint;

AnyCoat®, a material for pharmaceutical capsules and coatings; and ECH (Epichlorohydrin), a

raw material for epoxy resins. The Fine Chemicals Business upholds SFC and enables SFC to

branch out into new businesses such as Electronic Chemical Materials, and Eco-friendly and

Renewable Energy Materials.


Main Products

Mecellose®

Mecellose®, excellent at absorbing humidity and holding moisture, is an additive in

the form of white powder for construction. This product is widely used in

construction materials such as cement mortar, tile cement, paint, underwater

concrete and ceramic extrusion.

Hecellose™

Hecellose™ is a water-soluble polymer which is eco-friendly and highly functional.

It enhances the qualities of finished products. This product is used in various

products such as water-soluble paint, household items and various construction

materials.

AnyCoat®

AnyCoat® is a material for pharmaceutical capsules and coatings. This product

stores and protects medicines and helps to control drug efficacy and drug delivery

durability. This material is also used as an additive in processed foods.

ECH (Epichlorohydrin)

Epichlorohydrin is a key material for epoxy resins which are used in a wide range of

industries such as construction, shipbuilding and electronics.

PTAC

PTAC enhances the quality of paper by reinforcing the strength and retention level.

*Retention level: The level of pulp and filler remaining in the end product. This determines the quality of paper.

2012 ReviewIn 2012, SFC reinforced its patronage by expanding production facilities for cellulose

products. We began a full scale commercial production of Hecellose™ that is used as an

additive for water-soluble paint, cosmetics and shampoo. Mecellose® production capacity

was expanded by 8,000 tons in September 2012. We also increased our annual production

capacity of AnyCoat® which is used in high-value-added and functional pharmaceutical

products, by 4,000 tons in November 2012 to be capable of producing 7,000 tons a year.

Consequently, the expansion allowed SFC to strengthen its competitiveness and market

leadership.

Business Review 21


CARefuLLy PLAnTeD :


Since 2000, SFC has focused on strategic investment in the Electronic Chemical Materials

Business as if planting and growing new trees. We are taking the initiative in the innovation of

the IT industry through the development of core electronic materials such polymerized

toner for color laser printers for high resolution and high speed printing which is more

advanced than pulverized toners; TMAC, a core material of developing solutions for

semiconductors and LCDs; BT Powder, a key material for Multi-Layer Ceramic Capacitors

(MLCCs); and SELCION®, a core material for high-functioning Super Engineering Plastics.

Electronic Chemical Materials


Main Products

Polymerized Toner for Color Laser Printers

SFC has developed a polymerized toner with particles of even sizes and shapes

which is suitable for high resolution and high speed printing.

TMAC

TMAC is a core material of developing solutions for semiconductors and LCDs.

BT Powder

BT Powder is a filling material between electrodes and a core material for

Multi-Layer Ceramic Capacitors(MLCCs).

SELCION®(LCP)

SELCION® is a core material with excellent heat resistance and electric insulation for

high-functioning Super Engineering Plastics

2012 ReviewIn 2012, the Electronic Chemical Materials Business achieved a 22.1% increase in sales from

the preceding year. Sales of the Division exceeded the KRW100 billion mark in tandem with

robust growth in sales of Toner for color laser printers, TMAC and BT Powder.

Business Review 23


susTAinABLy AffoResTeD :

Eco-friendly Renewable

Energy Materials


Efforts for a sustainable future, environment-friendliness and renewable energy aim to enrich

mankind and serve as another springboard for SFC to jump. SFC is preparing for another big

leap forward through the development and commercialization of Bio-degradable Polymers

which are completely decomposed into water and carbon dioxide in nature, Polysilicon,

the fundamental building block of solar energy that replace fossil fuels, and Cathode Active

Materials, a core component for semi-permanent rechargeable batteries.


Main Products

Bio-degradable Polymer

Plastic has contributed to the convenience of our lives, and industrial development.

Nevertheless, the material causes environmental problems and results in soil, water,

and air pollutions when dumped or burnt. Recently, people have become more

interested in the development and use of eco-friendly plastics that can be completely

decomposed into water and carbon dioxide by naturally occurring microbes.

SFC established S-EnPol, Inc. to produce EnPol®, bio-degradable polymers. EnPol®

is providing eco-friendly solutions by replacing conventional plastics used in industrial

and agricultural film, automotive and electronic parts, construction materials,

household and office items and various packages.

Polysilicon

The use of fossil fuels goes against sustainable environmental protection. Issues about

the limit to fossil fuel reserves have been steadily raised. Under these circumstances,

solar power generation is taking the lead in the renewable energy industry as it is

getting closer to grid parity. In regards to production costs, this means that the

renewable energy becomes compatible to conventional fossil fuels. SFC has joined

forces with MEMC, a US polysilicon and wafer producer, and is preparing for

mass-production of high purity polysilicon (greater than 9N). Most strikingly, high

purity polysilicon will be produced at low cost as we will apply the FBR (Fluidized Bed

Reactor) technology, a highly efficient and differentiated production method.

Active Materials for Rechargeable Batteries

People can use rechargeable batteries semi-permanently by regularly recharging

them. This completely differs from primary batteries which cannot be reused once

discharged. Therefore, more and more rechargeable batteries, which are economical

and eco-friendly, are being used in mobile phones, smart devices, electric vehicles

and electrical grids. SFC founded STM, a company that produces Active Materials

for rechargeable lithium-ion batteries in tandem with TODA Corporation, a Japanese

company specializing in ceramics. Accordingly, we are focusing on the expansion

of our Rechargeable Battery Materials Business by making a foray into the Cathode

Active Material Business that covers Nickel, Cobalt and Mananese Oxides.

susTAinABLy AffoResTeD :

Business Review 25

sustainabilityReview


ever-Trusty

Our goal is to become a

World-Leading Chemical Company.

We believe that a truly world-leading

company always receives trust from

employees, customers,

local communities and partners and

takes the initiative in environmental

stewardship.

Ever-Trusty

Every day SFC plants and grows trees

of trust for the happiness of people.


SFC boosts the competitiveness of its products and preemptively secures core

future technology via relentless R&D efforts and open innovation based on

mid- to long-term strategies. Ceaseless R&D and resulting technological

leadership are none other than a driving force fueling SFC’s sustainable growth.

ReseARCh & DeveLoPmenT

Research on Biomaterials

Research on Chemical Frontiers

Research on Cellulose Derivatives

Research on Battery Materials

Research on Food Materials

Research on Toner

Research on BT Powder

Research on LCP

susTAinABiLiTy Review 29

We have been working on water-soluble polymers used in various products such as high-

performance additives for construction, pharmaceutical coating, food, and water-soluble paint.

Hecellose™, a new cellulose ether polymer which SFC successfully commercialized, won the

IR52 Jang Yeong-Sil Prize in 2012 in recognition of its technological excellence. We will continue

to develop highly functional materials that can satisfy the diverse needs of our customers through

proactive R&D initiatives on cellulose derivatives.

SFC continues to work on research and technology support for medical and food chemicals by

developing new applications of water-soluble polymers to cellulose relatives. We commercialized

AnyCoat®, a pharmaceutical coating material and AnyAddy®, a food additive. We have also

secured technologies that moderate major issues in the food industry such as high fat content and

food safety, and are actively developing health foods based on natural substances.

SFC is strengthening its business foundation by successfully developing and commercializing

polymerized toner for color laser printers. At the same time, we are developing toners as a future

growth engine by securing advanced technologies on environment-friendlier and high-performing

toners and conducting R&D activities on printed electronics as a new growth momentum for the

future.

SFC was selected as the leading organizer of a Korean government project of “developing

demand-pull parts materials”. The selection proved SFC’s technological prowess in the material

development sector. We are strengthening the electronic material business by developing

products of various grades and their applications.

SFC is developing new applications of LCP with its outstanding high heat resistance, high strength

and strong durability. We are spurring the development of new and value-added applications of

LCP, i.e. liquid crystal polymers for injection used in electric and electronic components and textile

composites.

Demand for high-capacity rechargeable batteries has increased rapidly due to the advancement

of mobile IT gadgets such as smartphones and tablet PCs, and the development of technology

for electric vehicles. SFC’s R&D leadership was acknowledged as the company took home

the Minister of Knowledge Economy Prize in the Nano Korea 2012 Awards in recognition of its

development of a core material for Rechargeable Batteries.

Demand for eco-friendly materials is increasing rapidly because of stricter environmental

regulations and more environmental activities by NGOs. Environmental issues have been receiving

more attention all over the world. By proactively coping with this trend, SFC became the first

company ever to develop bio-degradable etheric polymers and is the only company that can

produce them in Korea. We were certified with international environmental mark from the U.S.,

Germany and Japan. We will expand our growth spectrum by gradually developing applications of

biomaterials from food packages and agricultural films to materials for smartphones.

Next-generation materials and platform technology are the foundation for sustainable growth

engines. Therefore, we are concentrating on carrying out R&D activities for functional, energy and

nano materials. We will secure core technology for future growth in various sectors such as printed

electronics that replace existing processes, oxides for semiconductors and materials for metal

plating.

Research on Cellulose Derivatives

Research on Food Materials

Research on Toner

Research on BT Powder

Research on LCP

Research on Battery Materials

Research on Biomaterials

Research on Chemical Frontiers

※ERP:EnterpriseResourcePlanning

PLM:ProductLifecycleManagement

Elevating Level of SCM Operation,

Stabilizing ERP/PLM※Processes

Establishing Governance Management System Improving Level of Master Data

Management

Improving IT Infrastructure for Mobile Business Environment

ADvANCING CORPORATE MANAGEMENT

INFRASTRUCTURE

ENHANCING CAPABILITIES FOR

INNOvATION

UPGRADING OPERATIONAL

COMPETITIvENESS


SFC ceaselessly pursues change and innovation in external factors such as business,

products and services and internal factors such as systems and infrastructure.

This is because we know that SFC cannot take off without efforts for innovation and

change.

innovATion

SFC upgraded the S-ERP System by defining standard systems by eight core processes

(marketing, development, procurement, production, logistics, sales, service and management)

and re-establishing operation standards through process innovation in July 2012. The S-ERP

is duly recognized for its optimized combination of Samsung Electronics’ advanced processes

and the unique elements of the chemical industry. The S-ERP is all the more meaningful in that

SFC laid the foundation for securing future competitiveness by accumulating and developing

business and job processes by bringing innovation with a focus on processes, standards and

systems to individual capability-oriented tasks.

Upon the completion of the S-ERP, SFC built an SCM system that manages the whole supply

chains such as sales, production and logistics. This change allowed SFC to make quick

decisions by transforming the monthly operation system into a weekly operation system.

This also laid the foundation for objectivity and steadily improving the company’s operation

level through indices such as demand prediction accuracy, SOP execution rates, and

efficiency indices on production, purchases and inventory management.

SFC’s main goals in business innovation for 2013 are to enhance operational competitiveness,

to advance management infrastructure and to increase capabilities for innovation. To this end,

we are planning on making our systems such as SCM, PLM and ERP efficient and advanced

and making improvements to our mobile and IT infrastructure. In addition, we will steadily

reinforce our management system and improve the level of management.

“ BUILDING 「ADvANCED BUSINESS MANAGEMENT FOUNDATION」 THROUGH INNOVATION ON THE WAY OF WORKING”

2012 Implementation Policies

Rebuilding S-ERP Management System

Building SCM System

Securing Strong Competitive Edge by Increasing Practical Capabilities


※S-ERP System

▶ECC (ERP Central Component) : Building an ERP system based on ECC 6.0.

▶BI (Business Intelligence): Creating dashboards and standard report screens by 122 KPIs

▶EP (Enterprise Portal): Building a business portal (business screens by business packages)

▶MDM (Master Data Management): Building a companywide master life-cycle management system and a

master data quality management system.

※SCM : Supply Chain Management

Business Management System Based on Rules and Systems

▶Processinnovationbasedonglobalbest

practices

▶Establishment of process management

system

weekly Process Synchronization

▶Synchronization of business plans based on

demand forecast and sales and production

execution

▶Policy-based allocation

COMPLIANCE wITH PROCESSES/RULES

PROACTIvE QUALITY MANAGEMENT

PROCESS MANAGEMENT

INNOvATION

PROMPT CUSTOMER SUPPORT


SFC believes that customers should always come first. We always listen to

customers’ compliments as well as complaints and endeavor to reflect them for

quality improvement. Customer satisfaction is the core value of the “quality-first”

philosophy that SFC pursues.

QuALiTymAnAgemenT

SFC’s quality guideline, “Achieving top quality & implementing customer-oriented quality

management,” was derived from customers’ demand, the Samsung Group’s business

philosophy and SFC’s policies. The suggested strategic goals are “achieving zero customer

complaints,” “improving the quality of our products by comparing it with that of competitors”

and “enhancing product quality indexes”.

Our employees are required to attend education programs to prevent any work related

accidents or injuries and to understand the company’s quality policies and strategic goals.

With an eye towards providing the best-quality products to customers, SFC discovered and

executed four core tasks for a company-wide improvement. The four tasks are (1) following

processes and rules, (2) innovative process management, (3) proactive quality management

and (4) quick and accurate responses to customer needs. With the goal of accomplishing

these tasks, we pushed forward with detailed measures such as process optimization,

inspections of processes and overhauls of standards. Our ardent desire for the best qualities

enables us to make ceaseless efforts for the steady management of change at workplaces and

discover components to improve on.

We systematically manage customer visit records through the VOC System, since we are

aware of the importance of proper responses to customer needs and customer satisfaction.

Moreover, we endeavor to better cope with customer needs by sending out alarm mails and

short text messages. The Quality Responsibility System makes sure customer needs to be

satisfied as quickly as possible by transferring to relevant departments depending on causes.

Quality Policies and Goals

Strategies for Achieving Best Quality

Customer-oriented work

2012 2011

Inquiry about physical properties 10 13

Analysis methods 10 17

Regulation of harmful materials 20 28

Environmental safety 7 15

Product warranties 12 23

Technical support 5 2

Quality system 5 16

Appearance 6 -

wrapping 9 6

Others 2 7

Total 86 127

Number of Customer Inquiries by Categories

86(2012)

127 (2011)


2 CORE vALUES

3 MAIN AREAS

SAMSUNG GREEN MANAGEMENT VISION 2020

GREEN MANAGEMENT GLOBAL TOP

• Pursuing SUSTAINABLE GROwTH

• FulFilling social RESPONSIBILITIES

Preserving Natural Resources

and Curbing Greenhouse Gas

Emissions

Setting Standards on Global Green

Management and Leading the

Market

Preventing Environmental Accidents and

Ensuring Sustainable

Management


Growth that SFC pursues is sustainable and eco-friendly. It is SFC’s firm belief about

growth. SFC is on its way to become an environment-friendly company through the

implementation of various strategies and plans built upon a companywide consensus

about the importance of safe, clean and beautiful environments.

enviRonmenT & sAfeTy

The Samsung Group announced Green Management Vision 2020 by taking into consideration the

environment, safety and health for the sake of better lives of mankind and the preservation of nature

as key business activities. The foundation of the vision is a business philosophy for mutual prosperity.

The Samsung Group suggested two core values – pursuing sustainable growth and fulfilling social

responsibilities – to become the best company in green management in the year 2020. The group

selected three key areas for implementation: conserving resources and reducing energy consumption

and greenhouse gas emissions; establishing criteria for green management and becoming a market

leader; and preventing environmental safety failures and ensuring business sustainability.

The Samsung Group’s emblem of green management is a green

“S” surrounding the blue Earth. The emblem means that Samsung puts

its utmost efforts into preserving nature and protecting the environment

and helps keep the Earth clean.

Ever since acquiring an environmental manage-

ment system certificate in 1996, SFC has steadily

upgraded the Environmental Management System.

The Basic Act on Low-carbon Green Growth was

approved in 2010, and eco-friendly companies have

been designated as green enterprises. We have

implemented voluntary green management and

swiftly addressed environmental issues such

as climate change.

Green Management vision 2020

Emblem of Green Management

Implementation Strategy for Environmental Safety

Environmental Management Certification

With EnvironmentWith Customers

Dates of Recent Certification and Re-designation

ISO - 14001(KGS) '11. 12. 05

OHSAS 18001(KGS) '11. 12. 05

GREEN COMPANY (THE MINISTRY OF ENvIRONMENT)

'09. 04. 13


▶ Establishing Self-Control-led Safety Culture

▶ Removing Risk in Dangerous Work

▶ Implementing Perfect Regular Maintenance

▶ Weaving Safety Awareness into the Corporate DNA

▶ Ensuring Safety for Suppliers

▶ Reinforcing Manage-ment of Patients

▶ Making Improve-ment to Working Environment

▶ Green Company Recertification

▶ Continuance of Zero Environmental Accident Record

▶ Support for Expansion of Production and Facilities

▶ Putting Two-Stage In-novation into Practice

▶ Compliance with Stricter Regulations

▶Solidifying the PSM▶Increasing PSM Capacity▶ Self-Regulated Safety

Management

ENvIRONMENT SAFETY

PSM※ HEALTH

※PSM:ProcessSafetyManagement

SFC is pursuing the maximization of positive impacts from environment-friendly

management with various attempts at improving the environment. We have also built the

Department-based Environmental Management Systems. In addition, we accurately evaluate

the implementation of our Environmental Management System by conducting regular internal

and external audits.

SFC launched the Wide Smart Steam Network project to supply steam to companies in

demand for steam in the Yeocheon Industrial Complex by utilizing surplus steam from the Ulsan

Petrochemical Industrial Complex. This initiative saved 69,000 tons of Bunker C oil, reduced

energy costs by about KRW35 billion and CO2 gas emissions by 46,000 tons and brought

about an effect as good as that of planting 6.9 million pine trees on the environment. These

efforts paid off considerably, and SFC picked up the 2012 Samsung Green Management Prize.

SFC invested a total of KRW111.7 billion in

overall environmental protection for the past five

years. In particular, we considerably reduced

the amount of air pollutants such as sulfuric

compounds and dust by changing fuels for

cogeneration facilities from Bunker C oil to LNG,

a cleaner fuel in 2012. We also reduced much of

greenhouse gas emissions through a wide smart

steam network project.

2012

AirNo. of Investments 4

Amount (in million KRW) 24,652

waterNo. of Investments 15


wasteNo. of Investments 1

Amount (in million KRW) 95

Hazardous Chemicals

No. of Investments 3


vOCNo. of Investments 4


OthersNo. of Investments 1


TotalNo. of Investments 28


Environmental Management System

2012 Samsung Green Management Prize

Environmental Investment

▼ Cumulative

Environmental Investment

Amount (in billion KRw)

2008 64.7

2009 69.8

2010 77.2

2011 83.8

2012 111.7


Air Pollutant Management

As for fuel for the second and third boilers, SFC switched from Bunker C oil to eco-friendlier

LNG in 2011 and 2012, respectively. As a result, in 2012, the volume of air pollutants decreased

59% compared to 2011. TMS was installed in main outlets to monitor the concentration of

pollutant emissions in real time and maintaining it within 30% of the legal standard.

This measure allowed us to preemptively prevent environmental accidents. On the other hand,

we are striving to realize odor-free plants by operating a flare stack to curtail unpleasant odors

and VOC.

2012 2011

Emission Amount (kg/yr)

Per Ton (kg/ton)

Emission Amount (kg/yr)

Per Ton (kg/ton)

Dirt 20,546 0.0126 29,036 0.0170

SOx 50,837 0.0311 145,419 0.0851

NOx 113,868 0.0697 259,285 0.1517

HCl 257 0.0002 253 0.0001

Cl2 232 0.0001 313 0.0002

NH3 - 0.0000 1,812 0.0011

Atmospheric Emissions

185,740 0.1136 436,118 0.2552

Amount of Goods Produced

1,634,468 - 1,709,034 -

water Pollutant Management

All wastewater is first processed at each plant’s ECH (Epichlorohydrin) treatment facility and sent

to a sewage treatment center. To prevent environmental accidents, we have set up emergency

valves and recovery pumps in the rainwater reservoir. We continue to strive to enhance efficiency

in treating water pollutants such as introducing pre-treatment facilities that agglutinate, settle and

remove color-polluted wastewater by using concentrated sludge at our toner plants.

2012 2011

Emission Concentration

(ppm)

Total Amount (kg/yr)

Per ton (kg/ton)

Emission Concentration

(ppm)

Total Amount (kg/yr)

Per Ton (kg/ton)

COD(Mn) 28.8 168,397 0.1013 30.3 174,907 0.1023

BOD 19.6 114,778 0.0690 15.8 90,973 0.0532

SS 17.7 103,610 0.0623 10.3 59,465 0.0348

T-N 11.3 66,134 0.0398 14.4 82,956 0.0485

T-P 1.3 7,418 0.0045 1 5,772 0.0034

Total Amount

- 460,337 0.2768 - 414,072 0.2423

wastewater Emissions

- - 5,841,660 - - 5,769,860

Amount of Goods Produced

- - 1,634,468 - - 1,709,034

Pollutant Management Status


Managing waste

SFC manages the entire waste treatment process from discharges to the final handling

through an online system. Every year, we set goals and map out plans to substantially reduce

waste. In 2012, we decreased the volume of waste from all of our plants by 17%, including

the reduction of volume of wastewater by 25% year on year through the installation of a

centrifugal hydroextractor.

Name of waste(2012)

waste Status(Unit : tons)

Landfill Incineration Discharged at Sea Recycling Total

General wastes

Dust 40.62 - - - 40.62

Refractories 44.94 - - - 44.94

Catalysts 220.77 - - - 220.77

Absorbents 1,839.22 - - 61.32 1,900.54

wood - - - 307.86 307.86

Insulation Materials 54.25 - - - 54.25

Synthetic Resins - 879.55 - 133.09 1,012.64

Process Sludge 1,462.52 - - - 1,462.52

wastewater Sludge 16,215.58 - 13,827.46 - 30,043.04

Concrete - - - 2,522.33 2,522.33

Food - - - 156.74 156.74

waste Contain-ing Earth and

Sand- - - 14.88 14.88

Total General wastes 19,877.90 879.55 13,827.46 3,196.22 37,781.13

Desig-nated

wastes

Organic Solvents - 1,685.34 - 38.26 1,723.60

Oils - 18.34 - 54.43 72.77

Asbestos 693.78 - - - 693.78

Oils for Machines and

Operation- - - 36.66 36.66

Spent Batteries - - - 6.39 6.39

Total Designated wastes 693.78 1,703.68 - 135.74 2,533.20

Total wastes 20,571.68 2,583.23 13,827.46 3,331.96 40,314.33

Management of Hazardous Chemicals

SFC practices the efficient and careful management of hazardous chemicals by controlling

detailed information on all chemical materials from procurement and consumption to

production and abolition. In addition, prior to the approval of any new chemical material, we

systematically review the potential impacts of the material in terms of environment, safety

and health. In particular, we are preemptively dealing with the regulation of chemical materials

at home and abroad by applying the Korean REACH when introducing a new management

system. We are also taking the lead in protecting the environment through the survey of

chemical materials used and the control of pollutants discharged.

Pollutant Management Status


SFC has fire and disaster prevention organizations that diagnose the company’s safety.

SFC regularly replaced firefighting pipes with new ones, making steady improvements to facilities.

Moreover, we spare no investment in safety management stricter than a level set by regulations

and standards such as the construction of a room for water spray facility valves which aims to

prevent firefighting facilities from bursting in the winter.

SFC operates the Internal Industrial Safety and Health Committee where safety matters are

discussed. With the aim of actively listening to the opinions of employees, the company holds

monthly safety meetings and conducts monthly safety check-ups. 137 matters about safety and

health were dealt with and upwards of 95% of them were reflected for improvements.

We keep our workplaces safe via Safety Check-up Day, safety check-ups before long holidays

and special safety check-ups. In 2012, we discovered 1,135 matters to be improved and took

follow-up measures on 1,058 matters more than 93%.

Certification of Excellent Health Management

SFC obtained a 2012 certificate in the Excellent Health Management Company Certification

Program from the Ministry of Employment and Labor and the Korea Occupational Safety and

Health Agency which assesses activities to enhance the health of employees such as

anti-smoking and anti-obesity campaigns, exercises, and diets.

Healthcare Room

SFC is running Healthcare Room with hospital beds, medical equipments, medicines and a

sphygmomanometer. This enables the Healthcare Room to check up the medical conditions

such as basal metabolism and blood composition of individuals with the use of body composition

analyzer and blood analyzer. In addition, the company carries out customized health management

for employees such as prescription services for food and exercises. Healthcare Room is open not

only to employees of SFC but also to those of SFC’s partners.

Health Education Program

SFC is implementing its annual health education plan in order to take care of employees’ health,

in regards to respiration and hearing. The company selects protective gears appropriate for

employees by conducting fit tests. Employees receive education on the effects of harmful factors

and the kinds of protective gears and how to use them properly.

Decent working Environment

With an eye towards creating nice and safe working environments, SFC established and

implemented its own standards (30% or lower compared to the legal standards) to manage

chemical materials. We measure employees’ exposure to harmful factors during their work and

take proper measures to minimize such exposure. In addition, monthly checks are conducted to

improve irrational working conditions. We monitor working environments by taking measurements

every six months.

Safety Management

Companywide Safety Management

Safety Check-Ups and Improvements

Healthcare for Employees


PARTNERSHIP

ENERGIZING ORGANIZATION

WELFARE AND BENEFITS

HR DEvELOPMENT


Our management philosophy about human resources is that corporate

competitiveness and growth depend on employees’ happiness and satisfaction.

SFC aims to become a great company by establishing a great workplace.

humAn ResouRCes

We intend to develop core human resources to take the lead for the future of SFC.

SFC is running the Core HR Development Courses such as MBA, and the regional specialist

program, foreign language programs, the Global Education Curriculum and Tiered Curriculum.

In addition, our specialized curriculum to improve core capabilities on R&D, production,

technology, sales and marketing enables employees to constantly develop knowledge and skills

for their jobs and duties.

SFC is running programs to give financial support to all employees with children who go to

middle schools, high schools, technical colleges or universities. To take care of employees’ health,

the company is operating systems to support them with medical and dental costs.

Also, we offer home loans to employees who want to buy houses as the heads of their families.

In addition, we provide financial support to single employees who live in areas without company

housing and dormitories so that they can rent houses.

SFC is maintaining the proportion of female workers in total workers higher than the designated

level (10.34% in the Korean chemical industry set by the Ministry of Labor and Employment) for

two consecutive years. Besides, we support female workers by offering a variety of maternity

programs.

In order to create a corporate culture of cooperation and co-prosperity, SFC implements a

merit system to give advantages to the handicapped and those who are eligible for

Korean veterans’ benefits according to the relevant laws.

Theme Lectures (Special Lectures on Sensitivity)

SFC has hosted special lectures and counseling sessions on sensitivity, children education,

asset management and cultural events for employees with the objectives of creating a bright and

creative corporate culture.

Summer and winter Camps for Employees’ Children

SFC operates camps for children of employees twice a year to improve their learning and

creativity. The summer camp is a cultural camp that includes leisure activities such as trips to

water parks and on-site job experience programs, while the winter camp is an English camp

focusing on language skills.

HR Development Programs

welfare and Benefits

Gender Neutral Employment and Diversity

Partnership

Energizing Organization


FOUR-CHANGE SYSTEM

“Change” for Future that Supports Children’s Dreams and Hopes

Eco-Friendly “Change” to Create Sustainable Future

Happy “Change” to Communicate with Local Communities

Employees’ Participation in “Change” to Share Our Profits with the Marginalized

fuTuRe ChAnge

eCo ChAnge

hAPPy ChAnge

wiThChAnge

FUTURE GENERATIONS

ENvIRONMENT

LOCAL COMMUNITIES

EMPLOYEES


SFC, a self-professed responsible member of local communities, is striving for mutual

benefits while forming a warm corporate culture and reaching out to those in need.

We will sincerely fulfill our responsibilities as a corporate citizen in the future.

soCiAL ConTRiBuTion

With its slogan for social contribution, “Fine Change,” SFC commits itself to creating a sustainable

future by improving the lives of children and reaching out to people in its communities.

“Fine Change” implies the convergence of chemicals and the world. Community service teams

are being operated around volunteer activity centers in SFC’s business sites in Ulsan, Seoul,

Daejeon and Incheon. These teams carry out a wide array of social contribution activities such as

supporting the marginalized people, protecting the environment and sharing activities with local

communities.

Box Garden Campaign

SFC is spearheading a box garden cultivation campaign to turn small spaces in downtown areas

into small gardens with vegetables and flowers as part of its green downtown movement. Local

residents can learn the value of nature while they monitor the box gardens, learn about them,

spread manure on them and take part in box garden contests. The box gardens contribute to the

prevention of global warming through green curtain effects.

Activities to Preserve Environment of Grand Taehwa River Park

We have been operating an environmental protection group for Grand Taehwa River Park, the first

ecological park in Ulsan since 2005. We are carrying out various activities such as a hope-sharing

walkathon, a campaign to protect bamboo shoots and spreading manure in partnership with

volunteer groups such as the Taehwa River Protection Group and the Sipridae Forest Keepers.

Ecological Activities on Dotjil Mountain for Low-Carbon Green Growth

Since 2008, SFC has been taking the lead in planting and taking care of trees at its plants in

cooperation with many groups such as the Nam-gu Office of Ulsan, the Forest of Life in Ulsan,

Ulsan General Forestry Co. and the Yangsan Forestry Technology Education Center in order to

help forests grow. This is respected as a best practice of the prevention of global warming and the

creation of environment-friendly plants.

Ecological Activities for the Yeocheon River

SFC is going ahead with environmental protection activities for the Yeocheon River in partnership

with the Nam-gu Office in Ulsan. The main activities are cleaning rainwater reservoirs and

removing foreign materials and planting flowers.

Others

SFC is carrying out various social contribution activities such as “Planting for Forests of Hope” to

make elementary schools in Ulsan an environment-friendly forum for education, “Forest Camp for

Disabled Children,” which matches marginalized disabled children with employees, and “Taking

Care of Tall Old Trees,” an activity to take care of unattended old trees.

Social Contribution vision: Sharing with Communities

Main Activities


FinancialReviewManagement’s Discussion & Analysis

The financial statements for the current period (2012) and the two previous periods (2011 and 2010) that are included as information

in this section are based on the Korean International Financial Reporting Standard (K-IFRS, Consolidated Financial Statements). They

contain forward-looking statements regarding the company’s financial conditions, operating performance, and business plans. Such

forward-looking statements involve known and unknown risks, uncertainties and other factors not within control of the company, which

may cause the actual results or performance of the company to be materially different from any future results or performance explicitly

stated or implied in the forward-looking statements. Samsung Fine Chemicals (SFC) does not assume responsibility on the accuracy or

completeness of the information contained or implied in this section, and statements on the past and future cannot be construed as the

company’s promise or claims.

The information herein is based on the company’s plans, estimations and projections as well as assumptions regarding the political

and economic environment in Korea and other countries in which the company currently operates or will operate in the future.

Such estimations and projections are subject to change due to the operating environments. Therefore, users of this report should take

reasonable care when relying on the information contained herein. Estimations, plans and projections are based on conditions as of the

day this report was prepared. SFC does not bear responsibility for providing additional information on future events. The term “company”

used herein without any other qualifying description refers to “SFC.”

ExEcutivE Summary

In addition to the global financial crisis, the fiscal crisis in Eurozone countries compounded economic uncertainties in 2012. As a

result, the growth of developed and emerging economies slowed down. In the midst of the challenges posed by uncertain business

environments, SFC continued to pursue fundamental change and innovation for enhancing core competencies, turning crisis into

opportunity.

SFC has prepared for sustainable growth through active R&D and capital expenditures on core products. In 2012, SFC completed

capacity expansion for Mecellose® and AnyCoat® in response to an increase in demand and development of diverse applications.

In addition, the company also strengthened overall business competitiveness with facility investment on polymerized toner for color laser

printers and Ammonia dome tank. Separately, SFC expects to complete the ongoing capacity expansion for ECH and Caustic Soda in

the offing.

Moreover, SFC has secured future growth engines in eco-friendly business which presents a new paradigm. The company already

developed Bio-degradable polymers and improved process efficiency and productivity for commercial production. Also, facility

investment on new plants is underway for polysilicon, a renewable energy material, and Active Materials for Rechargeable Batteries.

SFC continues to reinforce mid- to long-term momentum through ceaseless R&D efforts for advanced materials.

In 2012, the company recorded the another historic-high sales of KRW1,431.2 billion and pre-tax income of KRW86.1 billion. Despite

greater uncertainty in the global economy, all employees of SFC are stepping up toward the vision of growing into a World-Leading

Chemical Company through change and innovation.

maNaGEmENt’S DiScuSSiON aND aNaLySiS

MD&A

FinAnciAl Review 45


MD&A

1. analysis of Operating resultsThe global economic growth was dampened in 2012 due mainly to the fiscal crisis in some Eurozone countries. However, SFC posted record-high sales of KRW1,431.2 billion, a 7.3% increase from the previous year, despite tough business conditions. This achievement was attributable to the balanced growth among major business divisions: General Chemicals, Fine Chemicals, and Electronic Chemical Materials. In particular, sales of Electronic Chemical Materials jumped 22.1% year on year. Meanwhile, operating income temporarily decreased 25.5% to KRW55.6 billion, and net income remained stable at KRW73.3 billion.

1.1. analysis of SalesSFC’s core business can be segmented into three parts: the Fine Chemicals Division growing with competitive products; the Electronic Chemical Materials Division notching up with full-scale operation; the General Chemicals Division recovering the profitability with business rationalization. At the same time, SFC is reinforcing the foundation for sustainable growth with new business engines such as Eco-friendly and Renewable energy materials.

In spite of a slowdown in the global economy, sales grew 7.3% in 2012 compared to the previous year in line with capacity expansion of main products and steady market demand of each business division. In particular, sales of toner for color laser printers soared 50.1% year on year; sales of BT Powder, a key material for MLCC, surged 42.0%; and sales of TMAC, a core material for developing solutions for semiconductors and LCDs, jumped 19.0%. Overall, sales of the Electronic Chemical Materials Division climbed 22.1% year on year, the KRW100 billion mark for the first time.

The Fine Chemicals Division also recorded robust growth as sales of Mecellose® and AnyCoat® increased 19.2% and 11.9% year on year, respectively. Last but not least, the General Chemicals Division grew 4.7% on the back of solid demand and sales increases of Caustic Soda and Ammonia.

(in billions of KRW) Fy12 % yoy Fy11 Fy10

Sales 1,431.2 7.3% 1,333.6 1,130.6

Operating profit 55.6 -25.5% 74.6 84.5

Net Income 73.3 -0.1% 73.4 85.1

2012 Sales Breakdown by Division

Fine Chemicals 33.8 %

Electronic Chemical Materials 7.7 %

General Chemicals 58.5 %

AnnUAl RePORT 2012 46SAMSUng Fine cheMicAlS

Sales (in billions of KRW) FY12 FY11 FY10

1,333.6

1,431.2

1,130.6


Fine Chemicals 483.3 9.1% 443.0 428.0

Electronic Chemical Materials 110.1 22.1% 90.2 74.4

General Chemicals 837.8 4.7% 800.4 628.2


Domestic 839.3 8.0% 777.0 622.6

Export 591.9 6.3% 556.6 508.0

Export Ratio (%) 41.4 -0.3%p 41.7 45.0

Separately, SFC showed remarkable achievements both at home and abroad. Even though the domestic economy suffered from an overall slump, its domestic sales amounted to KRW839.3 billion, up 8.0% compared to the previous year. Exports also rose 6.3% year on year to KRW591.9 billion. By region, SFC’s exports have been well diversified among Asia, Europe, China, the Middle East and the Americas.

1.2. Profitability analysisIn 2012, Cost Of Goods Sold (COGS) totaled KRW1,266.2 billion, and the gross profit margin edged down by 0.5%p to 11.5% because of sizable capacity expansion and the resulting increase in depreciation expenses.

Operating income amounted to KRW55.6 billion, a drop of 25.5% from the year earlier since SG&A expenses jumped 35.1% year on year in tandem with increases in logistics cost and R&D expenses. On the other hand, EBITDA rose 8.0% year on year to KRW154.3 billion, and EBITDA margin gained 0.1%p to 10.8% in 2012.

Operating Profit (in billions of KRW) FY12 FY11 FY10

55.674.6

84.5

FinAnciAl Review 47


MD&A

2012 Exports by Region

Asia 24.7 %

Europe 18.6 %

China 17.6 %

Middle East, Africa 11.4 %

Latin America 8.4 %

Japan 7.6 %

North America 7.0 %

CIS 4.7 %

While other income edged down by 2.7% year on year to KRW36.4 billion with slight decreases in dividend income and

gains on FX translation, other expenses plummeted 55.7% to KRW17.6 billion.


Other Income 36.4 -2.7% 37.4 44.6

Dividend Income 6.8 -8.1% 7.4 10.3

Gains on FX Translation 12.9 -1.5% 13.1 13.1

Gains on Currency Forwards 1.2 -60.0% 3.0 3.6

Other Expenses 17.6 -55.7% 39.7 20.3

Losses on FX Translation 12.5 -10.7% 14.0 14.3

Loss on Currency Forwards 1.7 -57.5% 4.0 3.6

Miscellaneous Losses 1.7 -85.5% 11.7 1.3

Financial Income 3.9 -27.8% 5.4 6.9

Finance Costs 0.2 -75.0% 0.8 0.5

Share of Profit or Loss of Joint Ventures 8.1 -25.0% 10.8 12.9


COGS 1,266.2 7.8% 1,174.2 988.9

COGS to Sales(%) 88.5 0.5%p 88.0 87.5

Selling & Administrative Expenses 80.5 35.1% 59.6 51.0

Logistics Cost 28.8 14.3% 25.2 30.5

Operating Profit 55.6 -25.5% 74.6 84.5

Operating Profit Margin (%) 3.9 -1.7%p 5.6 7.5

EBITDA 154.3 8.0% 142.9 153.8

EBITDA margin (%) 10.8 0.1%p 10.7 13.6



MD&A

On the back of a sharp drop in other expenses, the company reported net income of KRW73.3 billion in 2012 at the level similar to that of the previous year. Net profit margin also remained stable at 5.1% in 2012.

SFC has practiced a consistent dividend policy to maximize shareholder value by returning its profit in the form of cash dividends every year. In 2012, the cash dividend per share was KRW650, maintaining the dividend payout ratio over 20%.

2. analysis & Outlook by Business Division

2.1. Fine chemicalsIn 2012, sales of the Fine Chemicals Division amounted to KRW483.3 billion, an increase of 9.1% from the year earlier. The growth of the Fine Chemicals Division was led by globally competitive products such as Mecellose® and AnyCoat® which recorded sales increases of 19.2% and 11.9%, respectively. In addition, the company not only launched a high-value-added new product, Hecellose™, an eco-friendly additive for paint, household items and construction materials, but also completed the large-scale capacity expansion for Mecellose® and AnyCoat® in 2012. All in all, the Fine Chemicals Division will likely sustain its growth path in 2013.


Net Income 73.3 -0.1% 73.4 85.1

Net Profit Margin (%) 5.1 -0.4%p 5.5 7.5

EPS (KRW) 2,878 -3.0% 2,889 3,359

PER (X) 21.2 - 21.1 24.7

※PER is based on year-end share price(KRW 61,000)

Divisional Sales (in billions of KRW) FY12 FY11 FY10

483.3443.0

428.0


Divisional Sales 483.3 9.1% 443.0 428.0

Divisional Sales Contribution (%) 33.8 0.6%p 33.2 37.8

FinAnciAl Review 49


MD&A

Net Income (in billions of KRW) FY12 FY11 FY10

73.385.1

73.4

Fy12 % yoy Fy11 Fy10

Divisional Sales (in billions of KRW) 110.1 22.1% 90.2 74.4

Divisional Sales Contribution (%) 7.7 0.9%p 6.8 6.6

2.2. Electronic chemical materialsThe Electronic Chemical Materials Division achieved robust growth of 22.1% year on year amid the explosive volatility of its downstream industry. In particular, as the Division enhanced its competitiveness and market leadership and gradually expanded its contribution to the company’s top line, sales in 2012 exceeded the KRW100 billion mark for the first time. For a while, SFC will nurture the Electronic Chemical Materials Division to secure sustainable growth and improve profitability.

By product, toner for color laser printers, TMAC and BT Powder drove overall sales growth of the Division. Sales of toner for color laser printers surged 50.1% compared to the previous year on the back of robust demand growth. Sales of TMAC jumped 19.0% year on year to KRW40.1 billion in line with solid growth

of the downstream industry such as semiconductors. In addition, sales of BT Powder swelled 42.0% from the year earlier, powered by buoyant demand from the IT industry.

Fy12 % yoy Fy11 Fy10

Divisional Sales (in billions of KRW) 837.8 4.7 800.4 628.2

Divisional Sales Contribution (%) 58.5 -1.5%p 60.0 55.6

2.3. General chemicalsSales of the General Chemicals Division rose 4.7% year on year to KRW837.8 billion in 2012. Propelled by international price hikes, sales of Ammonia and Caustic Soda jumped 11.0% and 17.2% year on year, driving the growth of the General Chemicals Division. At the same time, SFC has restructured the Division’s operations and upgraded its product mix in order to enhance profitability and reinforce sustainable growth momentum.


837.8800.4

628.2



MD&A


110.190.2

74.4

3. analysis of Financial conditions SFC’s assets at the end of fiscal 2012 totaled KRW1,607.9 billion, up 14.8% from a year earlier. The company is able to maintain a sound financial structure on the back of excellent management efficiency and sufficient cash flows. SFC’s top priority is (1) effective capital expenditures to enhance its future growth momentum and profitability, (2) efficient working capital management to generate stable operating cash flow, and (3) financial strategy to maximize shareholder value.

Total Assets (in billions of KRW) FY12 FY11 FY10

1,607.9

1,400.41,284.1


Current Assets 506.9 -12.4% 578.6 588.7

Non-current Assets 1,101.0 34.0% 821.8 696.4

Total Assets 1,607.9 14.8% 1,400.4 1,284.1

Total Liabilities 454.5 45.8% 311.7 245.1

Total Equity 1,153.4 5.9% 1,088.7 1,042.6

Total Liabilities & Equity 1,607.9 14.8% 1,400.4 1,284.1

3.1. assetsAt the end of 2012, current assets declined 12.4% from a year before to KRW506.9 billion due mainly to a sharp drop in the ending balance of cash and cash equivalents. The company utilized internal cash reserves for large-scale capital expenditures on strategic products. With the steady growth in sales, trade and other receivables and inventories increased 5.3% and 13.3% year

on year, respectively. Propelled by strategic facility investment, tangible assets jumped to KRW677.4 billion, a year-on-year increase of 41.5% or KRW198.8 billion. Non-current assets also rose significantly, as a result of surge in both tangible and intangible assets.


Total Assets 1,607.9 14.8% 1,400.4 1,284.1

Current Assets 506.9 -12.4% 578.6 587.7

Cash & Cash Equivalents 43.7 -65.9% 128.2 86.1

Short-term Financial Instruments 0 -100.0% 30.9 130.0

Trade and Other Receivables 239.9 5.3% 227.9 186.5

Inventories 211.4 13.3% 186.6 169.5

FinAnciAl Review 51


MD&A

Other Current Assets 11.9 138.0% 5.0 15.6

Non-current Assets 1,101.0 34.0% 821.8 696.5

Tangible Assets 677.4 41.5% 478.6 358.6

Intangible Assets 43.3 74.6% 24.8 34.8

Other Non-current Assets 380.3 19.4% 318.4 303.1


Total Liabilities 454.5 45.8% 311.7 241.5

Current Liabilities 225.3 -1.8% 229.5 177.4

Trade and Other Payables 188.3 7.7% 174.9 132.8

Short-term Borrowings 10.7 -43.7% 19.0 12.1

Other Current Liabilities 26.3 -26.1% 35.6 32.5

Non-current Liabilities 229.2 178.8% 82.2 64.1

Debt Ratio (%) 39.4 10.8%p 28.6 23.2

3.2. LiabilitiesIn 2012, current liabilities decreased 1.8% from the year before as short-term borrowings fell by KRW 8.3 billion to KRW10.7 billion. However, total liabilities reached KRW454.5 billion, a year-on-year increase of 45.8% as non-current liabilities rose sharply to finance facility investment through the issuance of corporate bonds and long-term borrowings.

Since about 84% of current liabilities are non-interest bearing trade and other payables and most of non-current liabilities are corporate bonds and long-term borrowings, cash flows are scheduled in advance. Therefore, although the debt ratio increased to 39.4%, overall financial risk is negligible and under control.


Total Equity 1,153.4 5.9% 1,088.7 1,042.6

Equity Attributable to Owners of the Parent

1,153.3 5.9% 1,088.7 1,042.6

3.3. EquityAs of the end of 2012, SFC’s total equity stood at KRW1.153.4 billion, an increase of 5.9% from KRW1,088.7 billion in the previous year, mainly attributable to the growth in retained

earnings. Meanwhile, the equity ratio showed a slight drop by 6.0%p to 71.7%.



MD&A

4. analysis of cash FlowsCash flow is one of the important measures for evaluating a company’s operating performance. Through efficient capital management, SFC aims to generate a sufficient cash flow. In 2012, the company earned KRW34.5 billion of cash inflows from operating activities. Cash outflows from investing activities more than doubled to KRW226.8 billion due to capital expenditures

on property, plant and equipment primarily for Mecellose® and AnyCoat®. In terms of financing activities, while outlaying a total of KRW16.6 billion to pay cash dividend of KRW650 per share, the company generated KRW107.8 billion of cash inflows from the issuance of corporate bonds and long-term borrowings.

5. 2013 Business OutlookLooking at the year ahead, the global economy is expected to stage a gradual recovery on the back of monetary easing policies and growth in emerging markets. However, a strong rebound is unlikely in view of continued deleveraging in Europe and fiscal spending cuts in the U.S. In particular, taking into account Korea’s dependency on exports, Korean economy growth will likely slow down.

To turn crisis into opportunity, SFC will step up its efforts to grow into a World-Leading Chemical Company. SFC will further

reinforce its growth potential and profitability by upgrading production capacity for Mecellose® and AnyCoat®, enhancing cost competitiveness for general chemicals, and accelerating sales growth of electronic chemical materials in 2013. Although facing uncertain external business environments, SFC will put its utmost efforts to develop core competencies and become a World-Leading Chemical Company.


Cash Flow from Operating Activities 34.5 -75.4% 140.0 95.2

Cash Flow from Investing Activities -226.8 154.5% -89.1 -78.6

Cash Flow from Financing Activities 107.8 N/A -8.7 -16.5

Capital Stock 129.0 0.0% 129.0 129.0

Capital Surplus 331.1 0.0% 331.2 331.4

Other Components of Equity -9.0 -8.2% -9.8 -11.1

Accumulated Other Comprehensive Income

123.7 9.9% 112.6 122.8

Retained Earnings 578.5 10.0% 525.7 470.5

Equity Ratio (%) 71.7 -6.0%p 77.7 81.2

FinAnciAl Review 53


MD&A

FinancialReviewFinancial Statements

RepoRt of Independent AudItoRs

to the Shareholders and Board of Directors of

Samsung Fine chemicals co., Ltd.

We have audited the accompanying consolidated statement of financial position of Samsung Fine Chemicals Co., Ltd. and its subsidiaries (the

“Group”) as of December 31, 2012, and the related consolidated statements of comprehensive income, changes in equity and cash flows for

the year then ended, expressed in Korean won. These consolidated financial statements are the responsibility of the Group’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that

we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the

overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements, referred to above, present fairly, in all material respects, the financial position of

Samsung Fine Chemicals Co., Ltd. and its subsidiaries as of December 31, 2012, and 2011, and their financial performance and cash flows

for the year then ended in conformity with International Financial Reporting Standards as adopted by Republic of Korea ("Korean IFRS").

Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to

audit such financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report is for use by

those who are informed about Korean auditing standards and their application in practice.

Seoul, Korea

march 7, 2013

This report is effective as of March 7, 2013, 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, the readers of the audit report should understand that there is a possibility that

the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

FinAnciAl Review 55

Samsung Fine Chemicals Co., Ltd. and Subsidiaries (In thousands of Korean won)

Description 2012 2011

assets

i. current assets 506,910,553 578,643,293

Cash and Cash Equivalents ₩ 43,681,674 ₩ 128,224,777

Short-term Financial Instruments - 30,885,000

Held-to-maturity Financial Assets 5,735 32,310

Derivative Financial Instruments - 325,550

Trade and Other Receivables 239,854,355 227,919,078

Other Current Assets 11,923,438 4,673,340

Inventories 211,445,351 186,583,238

ii. Non-current assets Held for Sale - 3,341,622

iii. Non-current assets 1,100,965,307 818,467,538

Long-term Financial Instruments 36,903 36,903


Available-for-sale Financial Assets 256,336,525 241,628,772

Investments in Joint Ventures 116,762,785 66,910,733

Property, Plant and Equipment 677,365,852 478,578,627

Intangible Assets 43,253,689 24,798,540

Deferred Income Tax Assets 990,555 551,322

Other non-current Assets 5,769,408 5,530,201

total assets ₩ 1,607,875,860 ₩ 1,400,452,453

Liabilities

i. current Liabilities 225,280,078 229,512,610

Trade and Other Payables ₩ 188,318,873 ₩ 174,926,657

Short-term Borrowings 10,716,581 19,008,000

Derivative Financial Instruments 57,792 44,023

Current Income Tax Liabilities 10,380,137 10,935,131

Other Current Liabilities 15,806,695 24,598,799

ConsolIdAted stAtements of fInAnCIAl posItIon

December 31, 2012 and 2011



ii. Non-current Liabilities 229,240,702 82,215,011

Long-term Borrowings 32,267,000 -

Debentures 99,615,365 -

Defined Benefit Liability 39,449,381 30,020,436

Deferred Income Tax Liabilities 46,972,981 43,347,563

Other non-current Liabilities 10,935,975 8,847,012

total liabilities 454,520,780 311,727,621

Equity

i. Equity attributable to Owners of the Parent 1,153,347,490 1,088,714,677

Capital Stock 129,000,000 129,000,000

Capital Surplus 331,103,236 331,165,054

Other Components of Equity (8,937,233) (9,770,832)

Accumulated Other Comprehensive Income 123,720,440 112,623,313

Retained Earnings 578,461,047 525,697,142

ii. Non-controlling interest 7,590 10,155

Non-controlling Interest 7,590 10,155

total Equity 1,153,355,080 1,088,724,832

total Liabilities and Equity ₩ 1,607,875,860 ₩ 1,400,452,453

ConsolIdAted stAtements of fInAnCIAl posItIon

FinAnciAl Review 57

(In thousands of Korean won)

Samsung Fine Chemicals Co., Ltd. and Subsidiaries (in thousands of Korean won, except per share amounts)


i. revenue ₩ 1,431,158,801 ₩ 1,333,620,735

ii. cost of Sales (1,266,229,864) (1,174,150,353)

iii. Gross Profit 164,928,937 159,470,382

Selling and Administrative Expenses (80,514,877) (59,633,243)

Distribution Costs (28,838,291) (25,208,957)

iv. Operating Profit 55,575,769 74,628,182

Other Income 36,384,931 37,386,635

Other Expenses (17,595,042) (39,703,247)

Finance Income 3,858,712 5,420,266

Finance Costs (183,450) (793,311)

Share of Profit or Loss of Joint Ventures 8,058,528 10,843,421

v. Profit Before income tax 86,099,448 87,781,946

vi. income tax Expense (12,823,467) (14,355,255)

vii. Profit for the year ₩ 73,275,981 ₩ 73,426,691

viii. Other comprehensive income 7,112,376 (11,859,249)

Change in Value of Available-for-sale Financial Assets ₩ 11,148,477 ₩ (10,173,375)

Actuarial Losses (4,003,806) (1,648,755)

Actuarial Losses of Joint Ventures 19,055 (63,648)

Changes in Equity Method (20,093) -

Currency Translation Differences in Foreign Operations (31,257) 26,529

ix. total comprehensive income for the year ₩ 80,388,357 ₩ 61,567,442

Profit attributable to:

Owners of the Parent 73,278,546 73,429,254

Non-controlling Interests (2,565) (2,563)

comprehensive income attributable to:

Owners of the Parent 80,390,922 61,570,005

Non-controlling Interests (2,565) (2,563)

x. Earnings Per Share

Basic Earnings Per Share ₩ 2,878 ₩ 2,889

Diluted Earnings Per Share ₩ 2,877 ₩ 2,885

ConsolIdAted stAtements of CompRehensIve InCome

years Ended December 31, 2012 and 2011



Description

attributable to Equity Holders of the companyNon-controlling

interesttotal Equity

capital Stock capital SurplusOther components

of Equity

accumulated Other comprehensive

incomeretained Earnings total

Balance at January 1, 2011 ₩ 129,000,000 ₩ 331,422,338 ₩ (11,075,552) ₩ 122,770,160 ₩ 470,472,935 ₩1,042,589,881 ₩ 12,718 ₩1,042,602,599

comprehensive income

Profit for the year - - - - 73,429,254 73,429,254 (2,563) 73,426,691

actuarial Losses - - - - (1,648,755) (1,648,755) - (1,648,755)

actuarial Losses of associates - - - - (63,647) (63,647) - (63,647)

change in value of available-for-sale Financial assets

- - - (10,178,200) - (10,178,200) - (10,178,200)

currency translation Differences in Foreign Operations

- - - 31,353 - 31,353 - 31,353

transactions with Equity Holders of the company

Dividends - - - - (16,492,645) (16,492,645) - (16,492,645)

Disposal of treasury Stock - (257,284) 1,625,883 - - 1,368,599 - 1,368,599

Exercise of Stock Options - - (321,163) - - (321,163) - (321,163)

Balance at December 31, 2011 ₩ 129,000,000 ₩ 331,165,054 ₩ (9,770,832) ₩ 112,623,313 ₩ 525,697,142 ₩1,088,714,677 ₩ 10,155 ₩1,088,724,832

Balance at January 1, 2012 ₩ 129,000,000 ₩ 331,165,054 ₩ (9,770,832) ₩ 112,623,313 ₩ 525,697,142 ₩1,088,714,677 ₩ 10,155 ₩1,088,724,832


Profit for the year - - - - 73,278,546 73,278,546 (2,565) 73,275,981

actuarial Losses - - - - (4,003,806) (4,003,806) - (4,003,806)

actuarial Losses of associates - - - - 19,055 19,055 - 19,055


- - - 11,148,477 - 11,148,477 - 11,148,477

changes in Equity method - - - (20,093) - (20,093) - (20,093)

currency translation Differences in Foreign Operations

- - - (31,257) - (31,257) - (31,257)


Dividends - - - - (16,529,890) (16,529,890) - (16,529,890)

Disposal of treasury Stock - (61,818) 1,079,665 - - 1,017,847 - 1,017,847

Exercise of Stock Options - - (246,066) - - (246,066) - (246,066)

Balance at December 31, 2012 ₩ 129,000,000 ₩ 331,103,236 ₩ (8,937,233) ₩ 123,720,440 ₩ 578,461,047 ₩1,153,347,490 ₩ 7,590 ₩1,153,355,080

ConsolIdAted stAtements of ChAnges In equIty

Years Ended December 31, 2012 and 2011

FinAnciAl Review 59

ConsolIdAted stAtements of CAsh flows





i. cash Flows from Operating activities ₩ 34,486,209 ₩ 139,972,778

1. Cash Generated from Operations 37,717,208 137,235,892

2. Interest Received 3,499,709 6,266,969

3. Interest Paid (1,137,193) (575,463)

4. Dividend Income 6,777,151 7,370,703

5. Tax Paid (12,370,666) (10,325,323)

ii. cash Flows from investing activities (226,796,757) (89,137,033)

Collection of Short-term Loans - 2,891,735

Increase in Short-term Financial Instruments 30,885,000 99,115,000

Receipt of Other Non-current Assets 441,798 331,129

Receipt of Investments in Joint Ventures 12,205,107 11,257,522

Disposal of Held-to-maturity Financial Assets 32,310 15,935

Disposal of Available-for-sale Financial Assets - 6,961,500

Disposal of Property, Plant and Equipment 2,441,662 486,012

Disposal of Intangible Assets 730,909 30,889

Increase in Government Guarantee Deposits - 171,370

Acquisition of Long-term Financial Assets - (3,000)

Acquisition of Available-for-sale Financial Assets - (2,065,500)

Acquisition of Held-to-maturity Financial Assets (22,885) (122,180)

Acquisition of Joint Ventures (54,000,000) (20,000,831)

Acquisition of Property, Plant and Equipment (218,436,184) (182,649,542)

Acquisition of Intangible Assets (608,776) (3,802,179)

Increase in Other Non-current Assets (465,698) (1,754,893)

iii. cash Flows from Financing activities 107,799,334 (8,731,500)

1. Proceeds from Short-term Borrowings (8,113,409) 6,906,149

2. Proceeds from Long-term Borrowings 32,267,000 -

3. Proceeds from Debentures 99,593,200 -

4. Disposal of Treasury Shares 673,485 862,760

5. Dividends Paid (16,620,942) (16,500,409)

iv. Exchange Gains on cash and cash Equivalents (31,889) 28,269

v. Net increase(decrease) in cash and cash Equivalents (84,543,103) 42,132,514

vi. cash and cash Equivalents at the Beginning of year 128,224,777 86,092,263

vii. cash and cash Equivalents at the end of year ₩ 43,681,674 ₩ 128,224,777

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

Samsung Fine Chemicals Co., Ltd. (In thousands of Korean won)


assets

i. current assets 503,426,576 575,810,259

Cash and Cash Equivalents ₩ 42,572,408 ₩ 127,679,396

Short-term Financial Instruments - 30,885,000


Derivative Financial Instruments - 325,550

Trade and Other Receivables 239,804,912 227,887,846

Other Current Assets 11,889,053 4,631,880

Inventories 209,154,468 184,368,277

ii. Non-current assets Held for Sale - 3,341,622

iii. Non-current assets 1,109,939,629 820,406,046

Long-term Financial Instruments 33,903 33,903


Available-for-sale Financial Assets 255,148,665 240,440,913

Investments in Subsidiaries 19,756,980 16,756,980

Investments in Joint Ventures 118,030,395 64,030,395

Property, Plant and Equipment 671,129,664 472,047,753

Intangible Assets 39,762,216 21,302,382

Other Non-current Assets 5,675,766 5,408,830

total assets ₩ 1,613,366,205 ₩ 1,399,557,927

Liabilities

i. current Liabilities 224,692,821 230,455,347

Trade and Other Payables ₩ 187,976,285 ₩ 175,300,988

Short-term Borrowings 10,716,581 18,258,000

Derivative Financial Instruments 57,792 44,023

Current Income Tax Liabilities 10,364,748 12,395,050

Other Current Liabilities 15,577,415 24,457,286

sepARAte stAtements of fInAnCIAl posItIon

December 31, 2012 and 2011

FinAnciAl Review 61


ii. Non-current Liabilities 230,317,234 83,483,693

Long-term Borrowings 32,267,000 -

Debentures 99,615,365 -

Defined Benefit Liability 39,275,579 29,914,702

Deferred Income Tax Liabilities 48,263,716 44,721,979

Other Non-current Liabilities 10,895,574 8,847,012

total Liabilities 455,010,055 313,939,040

Equity attributable to Owners of the Parent

I. Capital Stock 129,000,000 129,000,000

II. Capital Surplus 331,103,236 331,165,054

III. Other Components of Equity (8,937,233) (9,770,832)

IV. Accumulated Other Comprehensive Income 123,740,437 112,591,960

V. Retained Earnings 583,449,710 522,632,705

total Equity 1,158,356,150 1,085,618,887

total Liabilities and Equity ₩ 1,613,366,205 ₩ 1,399,557,927

sepARAte stAtements of fInAnCIAl posItIon


(In thousands of Korean won)



i. revenue ₩ 1,430,857,079 ₩ 1,333,619,886

ii. cost of Sales (1,264,486,800) (1,172,356,817)

iii. Gross Profit 166,370,279 161,263,069

Selling and Administrative Expenses (79,274,986) (58,633,770)

Distribution Costs (28,840,153) (25,199,778)

iv. Operating Profit 58,255,140 77,429,521

Other Income 48,565,361 48,602,224

Other Expenses (17,589,303) (39,607,917)

Finance Income 3,852,682 5,356,226

Finance Costs (99,654) (777,166)

v. Profit Before income tax 92,984,226 91,002,888

vi. income tax Expense (11,680,663) (17,204,364)

vii. Profit for the year ₩ 81,303,563 ₩ 73,798,524

viii. Other comprehensive income 7,191,808 (11,822,131)

Change in Value of Available-for-sale Financial Assets 11,148,477 (10,173,375)

Actuarial Losses (3,956,668) (1,648,756)

ix. total comprehensive income for the year ₩ 88,495,371 ₩ 61,976,393

x. Earnings Per Share

Basic Earnings Per Share ₩ 3,193 ₩ 2,903

Diluted Earnings Per Share ₩ 3,192 ₩ 2,900

sepARAte stAtements of CompRehensIve InCome


FinAnciAl Review 63


Description capital Stock capital SurplusOther components of

Equityaccumulated Other

comprehensive incomeretained Earnings total Equity

Balance at January 1, 2011 ₩ 129,000,000 ₩ 331,422,338 ₩ (11,075,552) ₩ 122,765,336 ₩ 466,975,582 ₩ 1,039,087,704


Profit for the year - - - - 73,798,524 73,798,524

actuarial Losses - - - - (1,648,756) (1,648,756)


- - - (10,173,376) - (10,173,376)


Dividends - - - - (16,492,645) (16,492,645)

Disposal of treasury Stock - (257,284) 1,625,882 - - 1,368,598

Exercise of Stock Options - - (321,162) - - (321,162)

Balance at December 31, 2011 ₩ 129,000,000 ₩ 331,165,054 ₩ (9,770,832) ₩ 112,591,960 ₩ 522,632,705 ₩ 1,085,618,887

Balance at January 1, 2012 ₩ 129,000,000 ₩ 331,165,054 ₩ (9,770,832) ₩ 112,591,960 ₩ 522,632,705 ₩ 1,085,618,887


Profit for the year - - - - 81,303,563 81,303,563

actuarial Losses - - - - (3,956,668) (3,956,668)


- - - 11,148,477 - 11,148,477


Dividends - - - - (16,529,890) (16,529,890)

Disposal of treasury Stock - (61,818) 1,079,665 - - 1,017,847

Exercise of Stock Options - - (246,066) - - (246,066)

Balance at December 31, 2012 ₩ 129,000,000 ₩ 331,103,236 ₩ (8,937,233) ₩ 123,740,437 ₩ 583,449,710 ₩ 1,158,356,150

sepARAte stAtements of ChAnges In equIty



sepARAte stAtements of CAsh flows


FinAnciAl Review 65



i. cash Flows from Operating activities ₩ 48,056,317 ₩ 155,839,603

1. Cash Generated from Operations 39,059,798 141,886,296

2. Interest Received 3,496,597 6,204,295

3. Interest Paid (1,115,337) (567,148)

4. Dividend Income 18,982,257 18,628,224

5. Tax Paid (12,366,998) (10,312,064)

ii. cash Flows from investing activities (241,712,640) (104,137,961)

Disposal of Short-term Financial Instruments 30,885,000 99,115,000

Receipt of Held-to-maturity Financial Assets 32,310 15,935

Collection of Short-term Loans - 2,891,735

Disposal of Property, Plant and Equipment 2,441,662 468,367

Receipt of Government Grant - 171,370

Receipt of Guarantee 414,818 331,129

Disposal of Membership 730,909 30,889

Disposal of Available-for-sale Financial Assets - 6,961,500

Acquisition of Available-for-sale Financial Assets - (2,065,500)

Acquisition of Held-to-maturity Financial Assets (22,885) (74,630)

Increase in Long-term Loans to Employees - (210,000)

Acquisition of Subsidiaries (3,000,000) (14,500,000)

Acquisition of Joint Ventures (54,000,000) (20,000,831)

Acquisition of Memberships (607,082) (343,253)

Increase in Construction in Progress (218,124,984) (175,493,337)

Increase in Guarantees (462,388) (1,436,335)

iii. cash Flows from Financing activities 108,549,334 (9,481,500)

1. Proceeds from Short-term Borrowings (7,363,409) 6,156,149

2. Proceeds from Long-term Borrowings 32,267,000 -

3. Proceeds from Debentures 99,593,200 -

4. Disposal of Treasury Shares 673,485 862,760

5. Dividends Paid (16,620,942) (16,500,409)

iv. Net increase(Decrease) in cash and cash Equivalents (85,106,988) 42,220,142

v. cash and cash Equivalents at the Beginning of year 127,679,396 85,459,254

vi. cash and cash Equivalents at the End of year ₩ 42,572,408 ₩ 127,679,396

1.

2.

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4.

5.

6.

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16.

cORPORATeinFORMATiOn

Date of Establishment

Paid-in capital

independent Public accountants

Number of Shares issued

Listed on Korea Stock Exchange

Homepage

August 27, 1964

KRW129 billion

Samil Pricewaterhouse Coopers

25,800,000

April 15, 1976


NumBEr OF EmPLOyEES

SHarEHOLDEr OwNErSHiP

Seoul Office 127 (11.3%)

Ulsan Office 709 (63.2%)

Advanced Materials Research Institute 247 (22.0%)

Incheon Office 32 (2.9%)

Others 7 (0.6%)

Number of Employees 1,122 (100.0%)

Samsung Affiliates 32.0%

Institutional Investors 26.4%

Foreign Investors 6.5%

Individual Investors 33.8%

Treasury Stock 1.3%

Shareholder Ownership 100.0%

Europe Office_ Frankfurt


(As of the end of 2012)

(As of the end of 2012)

Samsung Fine chemicals trading(Shanghai) cO., Ltd.Rm1515, Shanghai Int’l Trading Center No 2201,

Yan An Road(W), Shanghai, P.R.China. 200336

Europe OfficeAm Kronberger Hang 6 65824 Schwalbach TS,

Germany

tokyo OfficeSinagawa Grand Central Tower 9F, 2-16-4,

Konan, Minato-ku, Tokyo, Japan

HeadquartersYeochonro No.217-gil (190 Yeochon-dong), Nam-gu,

Ulsan, South Korea

Seoul Office25th Fl., Samsung Electronics Bldg., Seochodaero No.74-gil 11

(1320-10, Seocho-2-dong), Seocho-gu, Seoul, South Korea

advanced materials research institute441, Exporo, Yuseong-gu (103-1 Moonji-dong), Daejeon, South Korea

incheon Office129B/4L, Namdong Industrial Complex, Namdongdaero No.29-gil

(696-3 Gojan-dong), Namdong-gu, Incheon, South Korea

Busan Office10th Fl., Samsung Fire & Marine Insurance Bldg.,

184 Jungangdaeo-ro (1205-22 Choryang-1 dong), Dong-gu, Busan,

South Korea

Overseas Domestic

tokyo Office

ulsan Office

Busan Office

incheon Office Seoul Office

advanced materialsresearch institute

Samsung Fine chemicalstrading(Shanghai) co., Ltd.

cORPORATe inFORMATiOn 67


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ANNUAL REPORT 2012


Tel. + 82.2.2255.0700Fax. + 82.2.2255.0710



06 SPEcial SEctioN




15 cEo MESSagE




23 FiNE chEMicalS





33 iNNoVatioN



43 huMaN rESourcES


FINANCIAL REVIEW

48 Md&a



AN

NU

AL R

EPORT 2012

Documents

Fine Creation