KT&G Reports Lower-than-Expected First Quarter Financial Performance
Recently, Korean tobacco manufacturer KT&G (KRX: 033780) announced its first-quarter financial performance ending on March 31, 2024. The company reported a total revenue of 1.292 trillion Korean won (approximately $940 million) and an operating profit of 236.6 billion Korean won (approximately $170 million). According to IBK Investment Securities, KT&G's operating profit in the first quarter was about 15% lower than market expectations.
IBK Investment Securities analyst Kim Tae-hyeon stated, "KT&G's first quarter total sales were 129.2 billion Korean won (approximately 940 million US dollars), a year-on-year decrease of 7.4%. Operating profit was 236.6 billion Korean won (approximately 170 million US dollars), a decrease of 25.3%."
In particular, KT&G's overseas and domestic Next Generation Products ("NGP") and overseas cigarette business maintained strong performance in the first quarter of 2024, continuing the strong trend from last year.
In the first quarter of 2024, the core growth driver of NGP business – NGP stick volume achieved growth in all key indicators such as sales, revenue, operating profit, etc. The overseas NGP stick sales saw a double-digit growth of 14.7%, reaching 2.11 billion units. Driven by strategic pricing strategies in core growth markets such as Indonesia, KT&G's overseas cigarette business also achieved revenue growth for the third consecutive quarter. KT&G's first quarter revenue from overseas cigarettes was 291.8 billion Korean won (approximately 210 million USD), a 10.1% increase compared to the same period last year.
Despite achieving significant performance in core business areas, the company saw a decline in overall revenue and operating profit in the first quarter compared to the same period last year. This downturn was primarily due to increases in manufacturing costs, the completion of large real estate development projects, and a decrease in consumer spending resulting in a reduction in revenue in the health functional food industry.
A spokesperson for KT&G stated, "KT&G is committed to enhancing competitiveness in core business areas, driving business transformation, and aiming to achieve a major leap forward to become a world-class company." The spokesperson added, "Despite facing pressures from inflation-driven manufacturing costs and economic downturns, KT&G is striving to turn its business around and achieve profitability in the second half of the year by strengthening global competitiveness and pursuing operational efficiency optimization."
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