Tobacco maker plans W5tr in shareholder returns, targets 70% overseas cigarette revenue by 2030
KT&G posted record quarterly revenue of more than 1.9 trillion won ($1.4 billion) amid robust overseas cigarette sales and a thriving heated tobacco business, while pledging bigger shareholder returns over the next four years.
The South Korean tobacco maker said Thursday that in the July-September period, consolidated revenue rose 4.3 percent from a year earlier to 1.91 trillion won, while operating profit climbed 13.9 percent to 530.1 billion won, both all-time quarterly highs.
For the full year, KT&G expects revenue of 7 trillion won and operating profit of 1.5 trillion won, up from 6.58 trillion won and 1.35 trillion won last year.
The core tobacco business led the results, with revenue up 6 percent to 1.31 trillion won and operating profit up 14.4 percent to 425.5 billion won, with its operating margin widening 2.4 percentage points to 32.6 percent.
Overseas cigarettes grew for a 10th straight quarter, setting quarterly records for volume and revenue. The next-generation products business, which includes heated tobacco, kept its top spot in Korea.
Its health functional foods business under Korea Ginseng Corp. also grew, with revenue up 3.4 percent to 372.2 billion won and operating profit up 12.2 percent to 80.1 billion won.
KT&G plans to expand abroad through price hikes, more premium sales of brands like ESSE and entry into about 30 new countries. Optimizing its global production, including a new Indonesian plant, should save more than 550 billion won over four years.
KT&G will also add direct overseas operations to its heated tobacco partnership, and LOOP, the Swedish nicotine pouch brand it acquired last year, aims to reach about 70 countries by 2030. KGC plans to sell more red ginseng ingredients abroad and is in talks with global food and beauty companies.
By 2030, KT&G aims to earn over 70 percent of cigarette revenue and 30 percent of health food revenue overseas, with next-generation products making up over 30 percent of tobacco revenue.
"By strengthening our growth pillars and expanding their global reach, we will deliver profitability-driven growth, not simple revenue expansion," CEO Bang Kyung-man said. "We will enhance shareholder value through world-class shareholder returns."
KT&G will raise its annual dividend this year by 2,000 won to 8,000 won per share, a 33.3 percent increase, and lift its payout ratio from about 60 percent to 75 percent or higher by 2030.
Starting next year, the company will also buy back and cancel 1.2 trillion won worth of shares over four years. Including dividends, total returns will exceed 5 trillion won, and the company will consider special returns if needed.
minmin@heraldcorp.com
