KT&G sales resilient

The imposition of graphic health warnings on cigarette packs sold in South Korea will have a limited effect on KT&G, according to a story in The Korea Times quoting analysts.

The analysts said that the company’s sales would rebound in the second half of this year.

The share price of Korea’s biggest tobacco company has been falling during the past month in line with growing concerns that graphic health warnings will adversely affect sales.

From December 23, tobacco packs manufactured for sale in Korea have been required to carry one of 10 pictures with written warnings about the adverse effects of smoking.

And already convenience stores and some other retailers are selling the cigarettes with the warnings.

It is expected to take a month or so for all the cigarettes produced before December 23 to be sold.

“We project that KT&G’s sales will decline about 13.3 percent in the first half of the year,” Cape Investment & Securities analyst Kim Tae-hyun said. “But the sales will recover to the previous year’s level by the third quarter.

“Electronic cigarettes, which have been weighing down on KT&G, won’t be able to replace conventional cigarettes. E-cigarettes have limited growth potential.”

Kim expects that KT&G will go beyond China, Russia, the US and the Middle East to stretch its sales into Latin America and Africa. “The company will continue to bolster its sales overseas this year and beyond,” he said.

Meanwhile, KT&G was quoted as saying that it was difficult to estimate the effects of graphic warnings on its sales.

“We still need more time to assess how warning photos could affect our sales,” a KT&G official said.

“We will continue to comply with regulations and, as always, we will make every effort to expand our overseas business.”