KT&G Aiming for Annual Sales of 6 Trillion KRW... Smooth Start Expected in 1Q

1Q Sales Expected to Continue Rising to 1.42 Trillion KRW
Operating Profit Likely to Fall Around 10% Due to Cost Burden

KT&G, which started the year aiming for "annual sales of 6 trillion won," is expected to report a decent start for the first quarter of this year. Although profitability is expected to slightly deteriorate due to increased costs from rising leaf tobacco prices, its core businesses, including the electronic cigarette business, are showing strong performance. Additionally, as investments to strengthen competitiveness in related businesses are expected to continue, the company is considered to be sailing relatively smoothly.

According to financial information system FnGuide on the 7th, KT&G's sales for the first quarter of this year are estimated to increase by 1.2% compared to the same period last year, reaching 1.4201 trillion won. Operating profit for the same period is expected to decrease by 10.2% to 299 billion won.

Profitability is expected to slightly worsen due to rising raw material prices. This is because a margin decline is inevitable due to the increased purchase price of leaf tobacco since the end of last year. Additionally, the temporary rise in cost ratio caused by increased exports of devices to expand the overseas electronic cigarette market is also expected to impact profit reduction. However, from the perspective of establishing a local stick market after device supply, the outlook is positive in the mid to long term.

While there are some regrets regarding profitability due to cost burdens, external growth is expected to continue steadily. Although sales of conventional cigarettes are declining in the domestic market, strong sales of heated tobacco sticks and the new product "Lil Able" are expected to offset this. KT&G's domestic electronic cigarette market share expanded from 2% in 2017 to 47.5% last year, and in the first quarter of this year, it surpassed 50%, solidifying its number one position. Stick sales also increased from 2.46 billion units in 2019 to 4.99 billion units last year.

In overseas markets, sales of both conventional cigarettes and electronic cigarette sticks are expected to continue increasing. Hyemi Kim, a researcher at Sangsangin Securities, said, "Exports of conventional cigarettes to the Middle East and Asia-Pacific regions are increasing, and the Indonesian subsidiary is also performing well. Additionally, as the number of countries entering the electronic cigarette market expands, overall growth is expected to continue."

KT&G 'Lil Able and Lil Able Premium'

KT&G plans to continuously strengthen its competitiveness through active investment in electronic cigarettes, its main growth engine. In January, KT&G presented a mid- to long-term future growth strategy, announcing plans to invest 3.9 trillion won over five years until 2027 and to increase sales to about 10.2 trillion won based on this. Furthermore, it extended its global sales contract with PMI for 15 years until 2038. Ji-hye Jang, a researcher at DS Investment & Securities, analyzed, "In the case of electronic cigarettes, KT&G is expected to broaden consumer choices by launching various platforms and increase global market share through a long-term contract with PMI."

Meanwhile, KT&G plans to enhance transparency by additionally disclosing sales and operating profits by division starting from the first quarter of this year. It will disclose performance by division?tobacco, health functional foods, real estate, and other businesses?and provide detailed factors affecting profit changes to the capital market. In the global heated tobacco division, it will also disclose additional information such as sales proportions by major overseas regions.

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