KT&G - Tobacco Reporter

KT&G Recognized for Carbon Neutrality

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.”

November 21, 2023

KT&G to Buy Back Shares

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.

November 15, 2023

KT&G Reports Record Revenue

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.

November 9, 2023

KT&G Joins Payment Integration Cooperative

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.”

November 7, 2023

KT&G Boosts NGP Capacity

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.”

November 6, 2023

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.

October 31, 2023

KT&G Breaks Ground for Kazakhstan Factory

KT&G Corp has broken ground in Kazakhstan for its fourth overseas plant as part of its expansion strategy.

The Korean tobacco firm aims to complete construction by 2025 and export its products to the Eurasian region. The news follows KT&G’s announcement last month that it would build a second factory in Indonesia, with an aim of starting operations in 2026 and exporting products to neighboring countries.

“The new Kazakhstan factory will serve as a global core production hub covering the Eurasian market and will be a forefront base for realizing the group’s future vision of global top-tier,” said KT&G CEO Baek Bok-in in a statement, referring to the company’s global ambitions.

The company aims to earn half of its sales from overseas businesses in 2027. It wants to achieve sales of KRW10 trillion ($7.4 billion) in 2027, compared with KRW5.9 trillion in 2022.

While focusing on the conventional cigarette business, KT&G said it will reinforce its heat-not-burn (HNB) and health functional food product businesses.

KT&G has exported its HNB products to more than 30 countries since 2020 through a distribution deal with Philip Morris International.

The company’s cigarette division earns 78 percent of its sales from the conventional cigarette business and 22 percent from the HNB business.

KT&G has six tobacco factories—three in South Korea and one each in Russia, Turkey and Indonesia.

October 13, 2023

KT&G Wins Admin and Security Award

KT&G received the Minister of Public Administration and Security Award at the 12th Korea Knowledge Awards organized by the Ministry of Public Administration and Security.

The Korea Knowledge Award is the nation’s highest accolade in the field of knowledge, awarded to government and public institutions and private enterprises that have shown outstanding results in knowledge administration and management, leading to government innovation and enhanced corporate competitiveness. KT&G was recognized for its systematic knowledge management accomplishments, including establishing a dedicated intellectual property division and developing intellectual property processes, distinguishing itself as the sole private enterprise recipient of the award.

KT&G has concentrated on strengthening its proprietary technology development capabilities to swiftly respond to an ever-changing market. The company has been operating a dedicated organization for intellectual property, constructing a unique intellectual property computer system for effective management and promoting in-house research and development as well as technological innovation by uncovering and nurturing employees’ innovative business ideas through initiatives like Patent Week, leading to patent applications.

KT&G’s consistent drive in knowledge management led to a significant increase in intellectual property creation, resulting in domestic patent applications surging from 82 in 2017 to 444 in 2022—a more than 440 percent increase. Domestic and overseas applications also saw a monumental rise, starting from 27 in 2017 to 1,065 in 2022—an increase of over 3,800 percent. Currently, the total registered trademarks stand at 7,132.

Owing to these achievements in intellectual property creation, KT&G was honored with the Prime Minister’s Award at the 56th Invention Day event hosted by the Korean Intellectual Property Office in 2021, recognizing its contribution to protecting national industrial technology and advancing the intellectual property system. Moreover, in the 2021 South Korean Corporate European Patent Index released by the European Patent Office, the company ranked third, following Samsung and LG. This year, KT&G was also chosen as one of the Top 100 Global Innovative Momentum Companies by LexisNexis, a global intellectual property solution company.

Cho Seong-moon, the head of KT&G’s R&D division, stated, “Based on our technological competitiveness and rapid adaptability to the ever-changing market, KT&G will continue to grow into a global ‘top-tier’ enterprise through the continuous enhancement of knowledge management.”

September 18, 2023

KT&G to Build Second Factory in Indonesia

KT&G Corp. plans to expand its production facilities in Indonesia, reports the Yonhap News Agency.

The South Korean tobacco company currently operates a factory in Surabaya and plans to build a second one in the Southeast Asian country. The new plant will produce KT&G products for export to neighboring and other countries.

Indonesia’s government is supporting the investment, according to KT&G.

The expansion fits into KT&G’s ambition to earn half of its sales from overseas businesses in 2027. It aims to achieve sales of KRW10 trillion ($7.53 billion) in 2027, compared with KRW5.9 trillion in 2022.

In addition to producing conventional cigarettes, KT&G said it will reinforce its heat-not-burn (HNB) and health functional food product businesses.

The company has exported its HNB products to more than 30 countries since 2020 through the distribution deal with Philip Morris International.

Currently, KT&G earns 90 percent of its overall sales from the cigarette business division and the 10 percent from the HNB division.

The company has four tobacco manufacturing plants, one each in South Korea, Russia, Turkey and Indonesia, whose combined capacity amounts to 13.6 billion cigarettes a year.

September 11, 2023

KT&G Releases 2022 Integrated Report

KT&G has published its 2022 Integrated Report: An ESG Overview, encompassing sustainability management strategies and performance.

The publication has three key sections: the Strategic Report, outlining the group’s novel vision; the ESG Report, detailing performance across various ESG domains; and the ESG Factbook, displaying the global information disclosure index and quantitative accomplishments.

Introduced within the Strategic Report of this publication, KT&G provides insights into its 2027 New Vision, combining prospective growth strategies with environmental, social and governance (ESG) principles. Moving forward, the company aims to channel its strengths into mobilizing business structure innovation, fostering sustainability alongside the spread of important ventures like next-generation products and health-functional foods.

KT&G says it has made significant progress toward achieving its ESG objectives. Among other things, the company has reduced its greenhouse gas emissions by 7.5 percent over a two-year period, even as it stepped up production at its Korean and international sites. KT&G aims to increase its use of renewable energy sources by more than 18 percent, mainly through the installation of solar power systems.

On the social front, KT&G helped address challenges through its Sangsang Planet and Sangsangmadang initiatives.

Recognizing sustainability as intrinsically tied to corporate value, “KT&G has boarded a fresh vision, seamlessly weaving it into our widespread growth strategy,” said KT&G CEO Baek Bok-in in a statement. “Imposing the strengths of our growing ventures, we will rise as an outstanding global enterprise, targeting over 50 percent of our sales from international markets within the upcoming five years.”

August 9, 2023

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