KT&G Issues Bonds for Overseas Expansion and Factory Acquisition

According to a report from fetv, a South Korean media outlet, Korean tobacco company KT&G is planning to issue corporate bonds for the first time since its establishment. The funds raised from the issuance will be used to purchase factory land in Kazakhstan and Indonesia.

KT&G, a South Korean company, has traditionally maintained a debt-free management style. However, due to its expansion of overseas investments and implementation of a shareholder return policy, the company is experiencing a decrease in cash flow. As a result, KT&G has issued unsecured senior corporate bonds worth 300 billion Korean won. These bonds include 100 billion won two-year bonds and 200 billion won three-year bonds, with respective annual interest rates of 4.18% and 4.322%.

Expand Global Production Bases

KT&G aims to issue corporate bonds to meet its medium- to long-term needs and seeks to secure global production bases to enhance production capacity. On January 26th this year, KT&G announced its medium- to long-term growth strategy. As part of this strategy, they plan to invest KRW 39 trillion in equipment investments (CAPEX) until 2027.

A total of 30 trillion won will be invested in three core business sectors, namely Next Generation Products (NGP), global tobacco business, and health functional food business. The remaining 900 billion won will be allocated for maintenance purposes.

The raised 300 billion Korean Won will be utilized to purchase land, production equipment, and other tangible assets for new factories in Kazakhstan and Indonesia.

Simultaneously, the investments will also be utilized for the development of infrastructure and security equipment. The newly established factory in Kazakhstan is a comprehensive facility, intended for the production of tobacco and NGP (Next Generation Products). Its completion is expected next year, covering an area of approximately 200,000 square meters. Similarly, in Indonesia, the newly established factory will be dedicated to tobacco production and is projected to be constructed between 2023 and 2025, covering an area of approximately 190,000 square meters.

Taking a Lead in Tobacco Market

Previously, KT&G obtained the 'AAA·Stable' rating from three credit rating agencies, including the Korean enterprise evaluation, good credit rating, and Korean credit rating, on August 23rd.

KT&G dominates the tobacco and red ginseng markets in South Korea, with a market share of 65% in cigarettes and 75% in red ginseng. Prior to its privatization, it held a long-standing monopoly on the manufacturing and sale of cigarettes and red ginseng in South Korea.