0. Introduction of a French-Korean Joint-Venture:
SAMSUNG ATOFINA Co. Ltd.
By: Eric QUENET
Seoul, March 31, 2004

1. Introduction of SAMSUNG-ATOFINA Co. Ltd. Company Profile
50/50 Joint-Venture between Samsung and Atofina (Chemical branch of Total)
Date of establishment: August 1st, 2003
PRODUCTS: Monomers = Ethylene (650Kt), Propylene (350Kt) Styrene (675Kt), Paraxylene (500Kt), MEG (120Kt) Polymers = Polyethylene (400Kt), Polypropylene (275Kt) Byproducts = C3/C4, aromatics, solvents, heavy ends (550Kt for all byproducts)
FEEDSTOCKS: Naphtha and Condensate (3,200Kt), refinery derivatives.
Revenues (2003): $ 1,685 Millions
Operating results (2003): $ 232 Millions
Numbers of employees: 960
4 Atofina expatriates

2. SAMSUNG-ATOFINA Co. Ltd.: a wide range of products
Automobile
Electronics
Samsung-Atofina is producing
a wide range of intermediates
products to serve almost
every applications.
Agriculture
Building

3. SAMSUNG-ATOFINA Co. Ltd
SAMSUNG-ATOFINA Co. Ltd.: a strategic location to serve the Chinese market
HARBIN 
BEIJING
DALIAN
SAMSUNG-ATOFINA SALES
(2003 volumes)
Korea: 60%
China: 30%
Other Asia: 3%
USA/Europe: 7%  
TIANJIN
TOKYO
DAESAN
Complex 
400km
QINGDAO
OSAKA
SHANGHAI
TAIPEI
XIAMEN  
GUANGZHOU 
SHENZHEN
HONG KONG

4. SAMSUNG-ATOFINA Co. Ltd.: an impressive and efficient complex

5. Samsung and Total: two similar giants with different strategies
2003 turnover (in M$)
96,476 (115 Trillion KRW)
119,188 (105 G€)
2003 operating results
(in M$)
8,725 (10.3 Trillion KRW)
14,810
Number of people
175,000
127,905
Activities
Electronics industries
Finance
Machinery & heavy industries
Chemical industries
Others
 Oil exploration & production: 48%
Refining & marketing: 26%
Chemicals: 26%
Company strategy
To be a world class player in IT sector
To be a world class player in Oil sector
Remark
avg. exchange rate in 2003: 1192 KRW/$ (2003)
1.13 $/Euros(2003)

6. The Total Group strategy in chemicals: to reinforce its petrochemicals activity and develop its presence on the Asian market
Total Chemicals activity
Total Petrochemicals position
→ Strong synergies with refining activities in feedstock.
→ Industrial synergies in Europe with refineries
→ A leading position in Europe
→ A significant position in North America
→ A minor position in Asia before the Samsung Atofina joint-venture

7. Asia petrochemicals: the biggest market with the highest growth rate
Consumption in 2002
WORLD = 101 MT
ASIA = 37% of the global demand
Incremental & AAGR
WORLD = + 51 MT (+5.2% / year)
ASIA = 45% of the global growth forecast
Consumption in 2010
WORLD = 152 MT
ASIA = 40% of the global demand
Driven by the Chinese demand, the Asian market will become in 2010 as big as North American + Western Europe markets

8. The Samsung-Atofina Joint-Venture: a strategic opportunity for Total
The options
The Chinese grassroots project
A difficult option
A 10-year process before start-up
The alliance opportunity in Korea
Ongoing restructuring and available competitive opportunities
The Samsung opportunity
Samsung was willing to set-up an alliance with a foreign partner in its chemicals activity
Good geographical location on the west coast facing China (400 km)
Relatively new assets (91-97) with good and well proven technology
Excellent reliability and highly skilled personnel
Specialty-focused portfolio
A significant position locally and on the Chinese market

9. The Joint-Venture negotiation
Timing
+ Initial contacts in April 2001
+ Negotiation period: March 2002-April 2003
+ Joint-venture launch: August, 1st 2003
Major Points
+ Assets evaluation: 1.55 billion $
+ Debt/Equity ratio: 100%
+ Creation of a new company
+ Total took 50% of the new company. Cash transfer 388 M$
The major difficulties faced during the joint-venture negotiation
How did we overcome them?
The asset evaluation
Evaluation team & intensive due-diligence
The joint-venture control
50/50 ratio
Shared management: 2 Joint Representative Directors
Shared responsibilities between Samsung & Atofina for key positions
The liability issues
Financial & industrial liabilities: creation of a new company
Intensive due-diligence with external companies
The deadlock and take-over
A positive and flexible mechanism for sole development & possibility of take-over to prevent stopping the joint-venture
Conclusions
+ Very direct negotiation
+ Be clear & consistent in your strategy . Do not hesitate to maintain clearly your position.

10. The results after 8 months of operation: an overall success
The results met the expectations of Total and exceeded them in:
Efficiency and reliability of the plant
High quality and skilled quality people especially in the industrial sector
Well-organized company under a strong and efficient leadership
In terms of financial results (more than 20% over business plan for 2003)
But the challenge is still there
In terms of organization and responsibility
In terms of communication and reporting

11. Still the cultural challenge remains
KOREAN
WESTERN
CORPORATE SYSTEM
Chaebols: interlaced company ownership with major influence on entire country activities
Holding companies: clear division of activities and minimal influence on rest of life
LABOR
Group mentality: strong work ethic; expectation of wage increases far above inflation/growth
Individualistic: weaker work ethic; expectation of wage increases in line with inflation/growth
APPROACH
Directive: decisions made at very high levels and little change possible without top agreement
Collaborative: authority is delegated and independent action is expected

12. Which lessons for potential investment: can Korea represent an alternative to China?
The advantages of the Korean market
Steady and impressive growth since 1960
Developed market with GNP per capita over $ in 2003
Ability to rebound to cataclysm
Its geographical location
Significant legal and transparency improvement since the IMF crisis
The majority of the foreign investments has been successful and well accepted by the Korean authorities since the IMF crisis
Its major strength: the Korean people
High-education level
Dedicated and motivated
Well organized people
The disadvantages of the Korean market
The Korean prejudice – bad image of Korea
Still a conservative society
The social issues
The salary increase

13. Conclusion
Korea can represent an alternative to China or be integrated within a Chinese strategy but:
the investments must be selective (high tech, not labor intensive)
and be persistent in your strategy and policy
東 西 合 璧