KT&G Accelerates Recovery of Tobacco Exports to the Middle East... Signs Export Contract Worth Over 2 Trillion Won

Agreed to Export Worth 2.2 Trillion Won Over 7 Years
Expectations Rise for Recovery from 2 Years of Export Slump
"Annual Sales Expected to Exceed 300 Billion Won in the Middle East"

[Asia Economy Reporter Choi Saeng-hye] KT&G announced on the 28th that it has renewed its tobacco export contract with Middle Eastern tobacco importer Alokozay International for the Middle East and Commonwealth of Independent States (CIS) countries.

The contract amount reaches 2.2576 trillion KRW (approximately 1.8 billion USD) with a contract period of 7 years and 4 months. KT&G has experienced sluggish exports to the Middle East over the past two years due to regional instability and sharp exchange rate fluctuations. Due to delays in the contract with Alokozay, exports to the Middle East, which accounted for 55.5% of total tobacco exports (by quantity, excluding the US subsidiary) in 2017, shrank to about 35% in 2018 and 20% last year. Last year, KT&G's tobacco export amount to the Middle East was around 100 to 150 billion KRW.

A KT&G official explained, "The uncertainties in our key overseas markets, which had been stagnant, have been resolved through this contract," adding, "The contract newly includes a minimum annual purchase quantity clause, which is significant as it enables securing a stable revenue source over a long period and minimizes risks in our main markets."

Industry insiders expect that KT&G will achieve annual sales of at least 300 billion KRW from the Middle East due to this contract. Shim Eun-joo, a researcher at Hana Financial Investment, said, "2.2 trillion KRW is the minimum; actual exports could exceed this amount." The securities industry forecasts that KT&G's export tobacco sales growth rate in the second half of this year will reach about 40%.

On the 29th of last month, Baek Bok-in, President of KT&G (left), and Andre Calantzopoulos, CEO of PMI (right), are taking a commemorative photo after signing a global export-related agreement at the Four Seasons Hotel in Gwanghwamun, Seoul.

Earlier, on the 29th of last month, KT&G declared the global market entry of its heated tobacco product 'Lil' through an e-cigarette export contract with PMI, the world's number one tobacco company. KT&G supplies the 'Lil' product to PMI, which sells it worldwide except in South Korea. KT&G receives payment and royalties based on the supply price. The initial contract period is three years, and the two companies plan to establish a long-term partnership if performance is favorable.

A KT&G official stated, "We are targeting overseas markets to complete a balanced domestic and international business portfolio with the goal of becoming one of the 'Global Big 4' companies by 2025," adding, "We plan to expand the number of countries we operate in from about 80 currently to over 100 this year through aggressive new market development."

This content was produced with the assistance of AI translation services.