Tag: KT&G

  • KT&G CEO Won’t Seek Reappointment

    KT&G CEO Won’t Seek Reappointment

    Baek Bok-in (Image: KT&G)

    KT&G’s governance committee on Jan. 11 finalized a longlist of CEO candidates, the company announced on its website. The list comprises 24 individuals including 14 external candidates and 10 internal candidates. The incumbent CEO, Baek Bok-in, has been excluded from the list as he has expressed his intention not to seek reappointment.

    For the external candidates, eight individuals who applied through open recruitment and six individuals recommended by search firms have all been included in the longlist. In addition, 10 internal candidates who have participated in the company’s senior management training program have also been included.

    The CEO appointment process is expected to take about three months. KT&G insists it will be conducted in a fair and transparent manner, following a three-step procedure involving the governance committee, the CEO candidate recommendation committee and approval at the general meeting of shareholders.

    Following the procedure, the governance committee plans to conduct a comprehensive assessment of the candidates who have been longlisted. The governance committee also intends to consider and weigh impartial and objective opinions from the advisory panel, composed of five external experts. The committee will finalize the first shortlist of CEO candidates by the end of this month and recommend it to the CEO candidate recommendation committee.

    Then, the CEO candidate recommendation committee will engage in a systematic and in-depth discussion regarding the candidates included in the first shortlist to form the second shortlist by mid-February. The second shortlist will be disclosed in a transparent manner upon its finalization.

    The final CEO candidate will be named by the end of February. The appointment will be subject to approval at the annual general meeting of shareholders in late March.

    The CEO candidate recommendation committee will be composed entirely of outside directors. Additionally, KT&G’s board of directors plans to propose an agenda item at the upcoming annual general meeting of shareholders to amend the articles of incorporation and make it obligatory to constitute the CEO candidate recommendation committee exclusively of outside directors, regardless of the incumbent CEO’s intentions regarding reappointment.

    Late last year, KT&G shareholder Flashlight Capital Partners urged the tobacco company to select its next CEO in a more transparent manner after expressing disappointment with the current CEO’s performance and identifying several shortcomings in the previous selection procedure.

  • KT&G Starts CEO Search

    KT&G Starts CEO Search

    Photo: Ink Drop

    KT&G Corp. has started the process for appointing its next CEO.

    To secure a wide array of qualified candidates, the external CEO candidate pool will be drawn from a combination of open recruitment and search firm recommendations. The internal CEO candidate pool will include individuals who have participated in KT&G’s senior management training program, as well as the incumbent CEO, Beak Bok-in. The governance committee will impartially assess both the external and internal pools to establish the longlist for CEO candidates.

    Then, the governance committee will institute an advisory panel comprised of external experts to bring an objective perspective into the process of selecting the shortlist for CEO candidates, thereby enhancing the impartiality of the process. KT&G plans to proactively identify and nurture both external and internal CEO candidates moving forward, under the guidance of the governance committee.

    The eligibility criteria for candidates participating in the open recruitment for the CEO position include individuals with experience in the tobacco or consumer goods industry (manufacturing or distribution business) as a representative director, or in the profit/loss management of a business unit equivalent to a company’s representative director.

    KT&G lists the following skill requirements:

    • in-depth understanding of the tobacco or consumer goods industry and management expertise, capability in driving new business initiatives and global expertise;
    • business intuition and strategic thinking skills responsive to environmental changes;
    • ability to communicate with and manage stakeholders;
    • universal morality and ethical awareness required of a CEO

    Candidate application for the open recruitment will be accepted through registered mail or e-mail by Jan. 10, 2024. Details regarding the application will be available on the KT&G website from Dec. 28, 2023.

    According to KT&G, the CEO appointment process will be conducted over approximately three months in a fair and transparent manner. The governance committee will finalize the shortlist for CEO candidates in late January by incorporating the impartial and objective opinions of the advisory panel composed of external experts, and recommend to the CEO candidate recommendation committee.

    After conducting a systematic and in-depth review of the shortlisted candidates, the CEO candidate recommendation committee will name the final CEO candidate and report to the board of directors in late February. The board of directors will then resolve the agenda for the annual general meeting of shareholders, and the CEO will be appointed following the approval at the annual general meeting of shareholders in late March.

    “We have been committed to improving our CEO appointment process, especially focusing on strengthening the transparency, impartiality and objectivity of the process,” said Lim Min-kyu, chairman of the KT&G board of directors.

    “Moving forward, we plan to conduct a comprehensive candidate selection process, taking into account the assessment and perspectives of the advisory panel comprised of external experts.”

    Earlier this month, KT&G shareholder Flashlight Capital Partners urged the tobacco company to select its next CEO in a more transparent manner, after expressing disappointment with the current CEO’s performance and identifying several shortcomings in the previous selection procedure.

    In a press note announcing the new CEO search, KT&G stressed that its governance committee is composed exclusively of outside directors. The Dec. 28 board of directors meeting, it added, was attended only by outside directors, “reinforcing the company’s commitment to ensuring independent decisionmaking of the board.”

  • KT&G Investor Urges Transparent CEO Search

    KT&G Investor Urges Transparent CEO Search

    Baek Bok-in

    Flashlight Capital Partners (FCP) is urging KT&G to select its next CEO in a more transparent manner.

    In a video published ahead of the South Korean tobacco firm’s annual general meeting in March 2024, FCP highlighted what it considered the problems during previous CEO nominations. It lamented the fact that current CEO Beak Bok-in was the only candidate, for example, and criticized the board’s unusually swift 11-day decisionmaking.

    FCP also expressed disappointment in the performance of Baek, who has held the position for three consecutive terms. Over nine years, KT&G stock fell by 19 percent while the KOSPI index rose by 26 percent, according to FCP.

    The investor questioned management’s “vain pursuit on volume” at the expense of profit, noting a 40 percent revenue growth coupled with a 17 percent decrease in operating profit. FCP pointed to such “lack of profit motive” as a primary cause for the stock’s over 50 percent discount relative to its peers.

    To address the shortcomings, Sanghyun Lee, managing partner of Flashlight Capital, suggested allowing sufficient time for a proper candidate evaluation process; considering outsiders with fast-moving consumer goods expertise; and thoroughly documenting the process for the sake of transparency.

    “The 11-day CEO nomination is unprecedented in Korea, standing out even among other former government-owned companies,” said Lee in a statement.

    In 2022, KT&G rebuffed a request by FCP to spin of its lucrative ginseng business and appoint certain outside directors.  

  • KT&G Recognized for Governance

    KT&G Recognized for Governance

    Photo: KT&G

    KT&G has been recognized as The Best in Corporate Governance at the 2023 KCGS Excellent Companies Awards Ceremony hosted by the Korea Institute of Corporate Governance and Sustainability (KCGS).

    As a leading domestic ESG evaluation agency, the KCGS annually selects and announces outstanding companies that have strived to improve their environmental, social responsibility and corporate governance. KT&G was awarded the highest prize among generally listed companies, The Best Award, in the corporate governance category, acknowledging its high-level sustainable management system.

    KT&G was praised for leading board-centric management based on the sound operations of its board. The company has enhanced its checks and oversight functions by appointing only external directors to its key committees and has maintained a 75 percent external director ratio over the past three years, thereby securing board independence. Additionally, KT&G has elevated its board’s continuous monitoring function by operating its internal audit organization directly under the board’s audit committee.

    KT&G has also been awarded an A+ in this year’s ESG integrated rating announced by the KCGS, maintaining an A grade (excellent) or higher for 13 consecutive years. KT&G has proactively adopted the Board Skills Matrix (BSM) to strengthen its “responsible, professional management system” centered on the board. The company has continued to enhance its governance structure by establishing board diversity and independence policies and formulating a group ethical charter.

    “Since its privatization, KT&G has established a transparent and independent advanced governance structure centered on external directors,” the company wrote in a statement. “We plan to strengthen further our board’s independence, expertise and diversity to establish a global top-tier level of governance.”

    The recent recognition confirms KT&G’s commitment to ESG. Since February 2021, the company has consecutively received the highest grade in its industry in the MSCI ESG evaluation. In addition, KT&G was awarded the prime minister’s commendation in the comprehensive ESG category at the 2022 Sustainable Management Merit Government Award.

  • KT&G Recognized for Carbon Neutrality

    KT&G Recognized for Carbon Neutrality

    Kim Jeong-hoo, head of KT&G’s Yeongju Plant (left), at the award ceremony | Photo: KT&G

    KT&G’s Yeongju factory has been recognized by South Korea’s Ministry of Trade, Industry and Energy for its commitment to achieving carbon neutrality.

    Since 2020, the Yeongju plant has actively engaged in reducing greenhouse gases through continuous investment in equipment and improvements in manufacturing processes, successfully cutting down 437 tons of oil equivalent over three years. Moreover, the plant participates in the energy saving technology information exchange program, contributing to greenhouse gas reduction policies and leading carbon reduction activities through ongoing education and promotional efforts.

    In 2021, the Yeongju plant acquired ISO 50001 (energy management system) certification. Last year, the plant was selected as an exemplary site under the Korea Energy Agency’s voluntary energy efficiency goal program.

    “KT&G aims to go beyond mere numerical improvements, linking our value chain to tackle climate change and lead in reducing greenhouse gases,” KT&G wrote in a statement. “We will continue to generate tangible ESG results and engage in diverse activities connected to sustainability.”

  • KT&G to Buy Back Shares

    KT&G to Buy Back Shares

    Image: Vlad Ispas

    KT&G will spend KRW2.8 trillion ($2.1 billion) to buy back shares and provide dividends to shareholders over the next three years, according to Yonhap News Agency. The company will buy back KRW1 trillion in shares for cancellation and distribute KRW1.8 trillion in cash dividends.

    “Seventy percent of KT&G shareholders are long-term investors who have kept KT&G stocks for more than three years. The government is known to be considering providing incentives to companies which cancel their own shares,” the company said during the Value Day 2023 event.

    KT&G aims to maintain a debt-to-equity ratio in the lower 40 percent range over the next three years. At the end of September 2023, its debt-to-equity ratio was 40.6 percent.

  • KT&G Reports Record Revenue

    KT&G Reports Record Revenue

    Photo: Taco Tuinstra

    KT&G reported record revenue of KRW1.69 trillion ($1.29 billion) for the quarter that ended Sept. 30, 2023. This reflects a 4 percent increase from the same quarter last year. Operating profit rose 0.3 percent to KRW406.7 billion despite cost headwinds.

    Solid performance in combustible business drove the revenue growth as the company’s total combustible revenue, including both overseas and domestic sales, jumped to KRW972.7 billion, a 3 percent increase year-on-year. Operating profit from combustible products recorded KRW269.4 billion, up 0.6 percent year-on-year.

    Overseas combustible business delivered impressive growth across all key metrics, including sales volume and revenue. KT&G’s overseas combustible revenue increased 26.3 percent to KRW321.6 billion, and the sales volume recorded 14.82 billion sticks, up 21 percent year-on-year. The double-digit growth in revenue and sales volume of overseas combustible products was mainly driven by strategic pricing and combined growth across export and overseas subsidiary volumes.

    The heat-not-burn business also recorded a double-digit increase in both domestic and overseas sales figures. KT&G sold 1.45 billion sticks in the domestic market and 2.03 billion sticks in overseas markets, which represents 13.3 percent and 22.3 percent growth year-on-year, respectively.

    In the third quarter, KT&G’s primary focus was on enhancing its financial performance by strengthening the global competitiveness of its core business areas. As part of the effort, KT&G made significant investments in Indonesia and Kazakhstan in September and October.

  • KT&G Joins Payment Integration Cooperative

    KT&G Joins Payment Integration Cooperative

    Image: Dzmitry

    KT&G has joined the payment integration cooperative, an initiative to help reduce the burden of raw material costs on small-sized and medium-sized partner companies.

    Before the system became legally established, KT&G already stipulated in purchase contracts that in the event of an increase in raw material prices compared to the contract period, it could proactively adjust the purchase contract amount to alleviate the burden on partner companies.

    To further reduce the burden, KT&G pays for its supplies monthly in cash and provides early payments before holidays. The company is also helping its contracted farmers save money through the dissemination of the “draft reduction device,” a fuel-saving tool for tobacco dryers.

    To promote the welfare of agricultural workers, the company has contributed KRW3.66 billion ($2.79 million) in health examination fees and scholarships since 2013.

    “The payment integration cooperative will enhance the competitiveness of partner companies, ultimately laying the foundation for a sustainable industrial ecosystem,” a KT&G representative said. “We will continue to expand the scope of social responsibility across the entire value chain in the future.”

  • KT&G Boosts NGP Capacity

    KT&G Boosts NGP Capacity

    Photo: KT&G

    KT&G has expanded its Sin Tanjin next-generation product (NGP) factory.

    During a ceremony attended by CEO Baek Bok-in and over 40 employees, the company pledged to grow its NGP segment into a leading business.

    KT&G has installed three additional electronic cigarette stick production lines this year, bringing the total number to eight. It also established an automated warehouse capable of storing up to 360,000 boxes.

    KT&G plans to further expand its production innovation hubs, focusing on domestic manufacturing facilities such as Sin Tanjin and Gwangju, to ensure a smooth response to the rapidly growing demand for its NGP products.

    The expansion of the Sin Tanjin NGP factory is part of KT&G’s investment plan, which was presented during the company’s “Future Vision Proclamation” event in January.

    During that event, KT&G announced its strategy would focus on e-cigarettes, heated tobacco and the international expansion of its combustible cigarette business. The company intends to increase the revenue share of its noncombustible products to more than 60 percent by 2027 through investments and innovation.

    The Sin Tanjin NGP factory will play a role as a growth engine that enhances the essential competitiveness of the NGP business, which is strengthening its market leadership.

    Baek Bok-in , CEO, KT&G

    In September, KT&G announced the construction of a new factory in Indonesia, which will be manufacturing for exports. In October, it broke ground for a new factory in Kazakhstan, establishing a foothold in Eurasia.

    “The Sin Tanjin NGP factory will play a role as a growth engine that enhances the essential competitiveness of the NGP business, which is strengthening its market leadership,” said Baek in a statement.

    “In the future, we will lead the growth of the NGP business based on innovative technology and advanced global partnerships and will leap to the ‘global top-tier’ through domestic innovative growth investments, including expanding production infrastructure.”

  • KT&G Celebrates Korea-Indonesia Ties

    KT&G Celebrates Korea-Indonesia Ties

    KT&G celebrated the 50th anniversary of South Korea-Indonesia diplomatic relations by organizing various global CSR activities, including support for university student startups, cultural festivals and improvements in the education environment.

    On Sept. 28, KT&G selected the finalists in a competition for business ideas at UNTAR University’s Imagination Entrepreneurship School in Jakarta, Indonesia. A day earlier, the South Korean cigarette maker hosted a similar event at the State University of Jakarta.

    Meanwhile, the KT&G Welfare Foundation finished renovating an elementary school in the Bogor region, transforming an old building into a new educational facility with an earthquake-resistant construction.

    In 2014, KT&G established the KT&G Korean Language Institute in Indonesia, providing approximately 2,800 people with opportunities to learn Korean. In addition, the company operates Imagination University, which supports the development of the capacity and cultural experiences of Indonesian youth. In 2021, it established the KT&G Vocational Training Center at Malang’s UKCW University, teaching marginalized youth sewing, computer technology and other skills.

    “We are taking the lead in promoting communication between the two countries through cultural exchanges in celebration of the 50th anniversary of Korea-Indonesia diplomatic relations,” said a KT&G representative. “We will continue to make efforts to spread Korean culture and enhance exchanges through various platforms.”

    Indonesia is an important market for KT&G, which aims to earn half of its sales from overseas business by 2027. The company operates a tobacco factory in Indonesia and recently announced the construction of a second manufacturing facility.