According to reports from Korean media, KT&G's comprehensive sales in the first quarter grew by 0.1% year-on-year to 14 trillion Korean Won ($1.05 billion), while operating profit fell by 17% to 2.761 trillion Korean Won ($207 million), which is expected to fall short of market expectations.
The reason for the decline in sales, according to Jang Ji-hye, a researcher at the Korean securities firm DS Investment & Securities, is that the cost of tobacco leaves has gone up, leading to a continued lack of profitability for cigarettes after the previous quarter. Additionally, there was a significant decrease in performance due to a decline in sales for the high-margin real estate business in Suwon.
Jang Ji-hye stated that due to the increased cost of cigarettes and a decline in the real estate industry, it is expected that KT&G's annual performance this year will struggle.
It is worth mentioning that Jang Ji-hye stated that KT&G's NGP business and KGC Ginseng Corporation had a stable performance in the first quarter. The decline was offset by strong sales of electronic cigarettes and new product Lil Able.
Jang Ji-hye stated that "although this year's performance is expected to be slightly subdued, KT&G is working with PMI to increase the number of NGP countries and showing a higher ratio of NGP compared to other global cigarette manufacturers.
He added: "Therefore, it is expected that the share of NGP business in KT&G's overall performance will increase from 14.7% in 2022 to 20.4% in 2027.
Further Reading:
Korean tobacco company, KT&G, has increased its short-term borrowing limit to 800 billion South Korean won. The company now requires a medium to long-term investment of 3.9 trillion South Korean won.
South Korea May Abandon Tax Hike on HNB, which Currently has a Tax Rate 90.4% Higher than Regular Cigarettes.
Phimo International's South Korean subsidiary appoints new CEO.
Reference(s):
KT&G, a South Korean tobacco company, has reported a steady growth in its electronic cigarette business and plans to expand its NGP (Next Generation Products) division within the group.
Effectiveness of switching to electronic cigarettes" - KT&G smiles
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