KT&G: FY22 Results & Key Developments

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In FY22, KT&G posts record earnings, largely on upbeat sales of heat-not-burn tobacco products in Korea & overseas1. Total cigarette and HnB volume reaches 101.5Bn (up +16.5%) and, consequently, KT&G moves above Altria to become world’s 5th largest tobacco company (ex-China).

For the tobacco business only, excluding KGC (Korea Ginseng Corporation) and Real Estate segments:

– Total Revenue: up +13.4% to ₩3.22T ($2.5Bn); Korea +8% vs. Overseas +22%

– Revenue mix: Korea %69, Overseas 31%

– Korea: cigarette volume flat at 41.1Bn; HnB volume up more than +40% to 5Bn sticks (3.5Bn in 2021)

– Overseas: cigarette volume up +27% to 49.4Bn; HnB volume up +54% to 5.7Bn sticks (3.7Bn in 2021).

FY23 Guidance: revenue up +19% to ₩3.83T (~$3Bn); Cigarette volume: 40.8Bn in Korea (66.3% SoS) and 53.3Bn overseas

In Korea, HnB’s weight in total tobacco/nicotine market reaches 17.1% and K&G maintains its market leadership with 47.5% SoS (Share of Segment) – ahead of PMI & IQOS.

KT&G: Overseas Expansion Ambitions

In Jan 2023, PMI and KT&G announced the agreement to extend and deepen collaboration2 as PMI retains the long-term exclusive rights to commercialize KT&G’s innovative smoke-free products outside South Korea

– 15 years

– Performance-review cycles and volume commitments for each three-year period

– Commitment for the first 3-year period equivalent to 16Bn consumables.

PMI and KT&G will call on regulators to leverage better alternatives to reduce cigarette use. Moreover, KT&G will seek to acquire PMTA and MRTP for its heated tobacco products from the US FDA.

Within this context, KT&G revealed its aspirations for large-scale investment and global expansion3,4,5 – aiming to become a top-tier company by 2027 with 50% of sales from outside Korea

– $1Bn to be invested in RRPs to increase global demand, secure overseas production bases and develop global innovation platforms

– 20% annual growth and $25Bn in total sales aimed in RRPs over the next 15 years via partnership with PMI.

KT&G’s shift of focus to RRPs in overseas growth6 comes a year after it suspends its tobacco business in the US for an unspecified period, referring to a hostile business environment. Before the suspension, KT&G was a key player in the US deep discount segment and was generating ~4% of its revenue from the US.

KT&G: Shareholder Activism7,8,9,10,11

Following Flashlight Capital (Singapore) and Anda Asset Management (Korea), Oasis (an aggressive activist fund based in Japan) joined the ranks of activist shareholders targeting KT&G in Feb 2023. Oasis requests measures given the under-performing stock price (down 36% since July 2016).

Recall: Flashlight Capital established ~3% stake in KT&G in Oct 2022 and asked the Company to establish a mid-/long-term plan

– to elevate HnB (lil) as a key growth driver and have HnB account for half of sales

– to spin-off Ginseng business (KGC)

– to divest non-core assets

– to commit to ESG improvements through actionable plans

– to return the excess cash to shareholders ( to triple dividend pay-out through quarterly payments and/or to re-purchase & cancel 15% of the outstanding shares)

As the latest development in a long conflict between the activities and K&G, a group of activist funds filed an injunction against KT&G, in Feb 2023, in a move to table a set of thorny issues that have largely been dismissed by the Company.


  1. https://en.ktng.com/report?cmsCd=CM0044 ↩︎
  2. https://pmi.com/investor-relations/press-releases-and-events/press-releases-overview/press-release-details/?newsId=25886 ↩︎
  3. https://koreaherald.com/view.php?ud=20230205000122 ↩︎
  4. https://koreatimes.co.kr/www/tech/2023/01/129_344329.html ↩︎
  5. https://koreatimes.co.kr/www/tech/2023/02/129_344991.html ↩︎
  6. https://koreatimes.co.kr/www/nation/2021/12/419_320557.html?fl ↩︎
  7. https://koreatimes.co.kr/www/tech/2023/02/419_346048.html ↩︎
  8. https://kedglobal.com/shareholder-activism/newsView/ked202302220023 ↩︎
  9. https://flashlightcap.com/flc/wp-content/uploads/2022/10/Letter-to-Shareholders-Oct-26-2022.pdf ↩︎
  10. https://ft.com/content/bdbe96b9-3225-4ba6-bbcb-578529087a1f ↩︎
  11. https://koreatimes.co.kr/www/nation/2022/10/419_338627.html ↩︎

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