KT&G: News

August 2026: Supreme Court Ends Patent Dispute Between KT&G and EM-Tech; KT&G Asserts ‘No Impact’ on Next Generation Products

A multi-year intellectual property legal battle between KT&G and electronic device manufacturer EM-Tech over heated tobacco technologies has officially concluded. The Supreme Court of Korea dismissed the final appeals from both parties without further review, cementing an appellate court ruling that awarded EM-Tech the legal rights to five out of six disputed patents.

The conflict originated during the initial development phase of heated tobacco products in March 2017, when KT&G partnered with EM-Tech on early device prototypes. Delays in finalizing a formal agreement led EM-Tech to register several co-developed technologies under its own name. KT&G later filed a lawsuit seeking ownership transfer of six patents, but district and appellate courts consistently upheld EM-Tech’s rights to five of them, an outcome now permanently locked by the high court’s dismissal. For EM-Tech, the final judgment eliminates long-standing legal uncertainties surrounding its intellectual property and establishes a firm foundation to utilize these technologies in future partnerships with international tobacco firms.

Meanwhile, KT&G reassured investors and consumers that the ruling will cause zero disruption to its Next Generation Product division. The five patents involved pertain strictly to early prototype designs that are not implemented in any currently commercialized products, meaning no sales suspensions or manufacturing adjustments are necessary. KT&G stated that the company respects the judicial ruling and will maintain its growth strategy across heated tobacco and nicotine pouch markets uninterrupted.

August 2026: KT&G Raises Full-Year Earnings Outlook Following Strong Second-Quarter Growth

South Korean tobacco manufacturer KT&G reported an 18.5% year-over-year increase in second-quarter operating profit, driven by gains in overseas cigarette sales, next-generation tobacco products (NGP), and improved margins in its health functional foods division. Following four consecutive quarters of double-digit operating profit growth, the company has raised its full-year revenue and profit targets while increasing its interim dividend.

According to regulatory filings, KT&G recorded consolidated second-quarter revenue of ₩1.7016 trillion, up 9.9% from the same period last year, while operating profit reached ₩414.5 billion. For the first half of the year, revenue rose 12.0% to ₩3.4052 trillion, and operating profit grew 22.6% to ₩778.9 billion.

Overseas Cigarettes

Overseas sales served as the primary growth driver during the second quarter. Revenue in the segment reached ₩557.7 billion, an 18.9% increase year-over-year, while operating profit rose 45.6%. The performance was supported by a combination of higher sales volumes and strategic price adjustments. Overseas operations now account for 54.1% of total cigarette revenue, exceeding domestic market sales for the first time.

Next-Generation Products (NGP)

Second-quarter NGP sales rose 23.8% to ₩242.7 billion, bringing KT&G’s domestic market share in the category to 48.2%. The expansion was aided by higher sales of premium consumables following the February release of the ‘Lil Able 3.0’ device. Additional product launches are scheduled for the second half of the year.

Health Functional Foods

Subsidiary Korea Ginseng Corporation (KGC), maker of the ‘Cheong Kwan Jang’ brand, reported a 61.3% increase in second-quarter operating profit to ₩10 billion. High-margin domestic distribution channels and cost-reduction measures offset lower sales in China resulting from inventory adjustments.

Strategy and Shareholder Returns

The performance aligns with operational shifts initiated under Chief Executive Officer Bang Kyung-man, who took office in March 2024. The strategy emphasizes expanding direct overseas distribution, scaling international NGP platforms, and reallocating capital through the divestment of non-core assets.

Metric / Policy	Previous Target	Updated Target / Status
Revenue Growth	3.0% – 5.0%	5.0% – 7.0%
Operating Profit Growth	6.0% – 8.0%	10.0% – 13.0%
Interim Dividend	₩1,400 / share	₩2,000 / share
Return on Equity (ROE)	—	15.0% (Targeted by next year)
Global Sales Share	—	50.0% (Targeted by next year)

KT&G completed its planned treasury share cancellations ahead of schedule under its 2024–2027 capital management framework. Further share buybacks and cancellations are planned for the second half of the year, with an updated shareholder return policy scheduled for release in the fourth quarter.

August 2026: KT&G Shifts ‘THIS’ Production to U.S. via Strategic Partnership with Altria

KT&G is shifting the production of its popular THIS cigarette brand to the United States through a strategic manufacturing and export partnership with Altria Group. Under the reciprocal arrangement, Altria manufactures KT&G’s THIS brand at its U.S. production facilities, while KT&G manufactures cigarettes for Altria at its production hubs in South Korea. The two companies then conduct cross-border export and import operations to supply their respective markets.

The bilateral export/import framework is central to Altria’s broader financial and tax strategy. By engaging in high-volume export and import operations, Altria leverages federal duty drawback provisions – a U.S. Customs and Border Protection program that grants tobacco companies rebates on federal excise taxes paid on imported goods when matching quantities of similar products are exported. Historically limited by its domestic-only market focus, Altria has increasingly used international contract manufacturing deals to establish the necessary export volume required to claim these lucrative excise tax refunds.

The efficiency of this strategic partnership is already reflected in Altria’s operating metrics: Altria reported a 55% year-over-year surge in contract-manufactured export cigarette volume during the second quarter of 2026. The federal tax rebates derived from duty drawback claims have provided crucial margin defense against long-term declines in traditional U.S. combustible cigarette sales volume. For KT&G, localized U.S. manufacturing of THIS reduces long-distance shipping overhead while securing a stable footprint in the Americas.

July 2026: KT&G Accelerates NGP Expansion as ‘lil’ Captures 47.4% Domestic Share and Builds Global IP Barrier

South Korea’s heated tobacco market continues to expand rapidly amid a decline in traditional cigarette consumption, with domestic sales of heated tobacco products (HTPs) rising 12% on average per annum from 440 million packs in 2021 to 695 million packs in 2025. HTPs accounted for almost a fifth of South Korea’s total domestic tobacco volume of 3.5 billion packs in 2025. Within this shifting market, KT&G’s flagship HTP brand, “lil,” captured a 47.4% share of the domestic stick market in the first quarter of 2026 – a 1.4 percentage point increase from the same period last year.

The growth of the “lil” platform has transformed KT&G’s next-generation product (NGP) division into a major revenue driver. Between 2020 and last year, total NGP sales expanded at a compound annual growth rate of 26%, increasing from 279 billion KRW to 890 billion KRW. Over the same five-year span, the NGP division’s contribution to KT&G’s total tobacco revenue more than doubled, rising from 9% to 20%. Domestic sales accounted for 587 billion KRW of last year’s NGP revenue, while overseas revenue reached 303 billion KRW across 34 active international markets, bringing total domestic and export volume to 14.8 billion sticks.

KT&G’s international push operates against a global backdrop dominated by Philip Morris International (PMI), which holds approximately 75% of global HTP volume. While KT&G continues to supply its devices to international markets through a distribution partnership with PMI, the company is concurrently leveraging its established overseas conventional cigarette networks to build direct sales operations.

On the device front, KT&G operates three distinct device lines – Lil Solid (pure heated tobacco), Lil Hybrid (heated tobacco and liquid cartridge combination), and Lil Able (multi-stick compatible) – all of which have been iterated to version 3.0 to reduce warm-up times and improve charging efficiency. This multi-platform product strategy is backed by an aggressive intellectual property portfolio. After filing roughly 80 NGP patent applications in 2017, KT&G submitted 4,694 NGP patent applications over the three-year period from 2022 to 2024, averaging over 1,500 filings per year. By late last year, the company’s total registered intellectual property portfolio reached 16,751 rights, with overseas registrations accounting for 77% (12,929) of the total. This accumulation of international patents creates technical entry barriers to protect KT&G’s innovations in NGPs.

July 2026: KT&G Q2 2026 Results to Be Driven by Steady Domestic Market Share and Record-High Export Demand in Eurasia

Projections for KT&G’s Q2 2026 financial results indicate steady top-line growth and improved operational profitability. Consolidated revenue for the quarter is estimated to range between ₩1.63 trillion and ₩1.70 trillion, representing a year-on-year increase of 5.8% to 8.0%. Operating profit is projected to settle between ₩395.7 billion and ₩402.5 billion, marking a year-on-year expansion of 13.1% to 15.0%. This anticipated performance aligns with market consensus, driven by a cyclical turnaround in domestic tobacco demand, high-margin expansion in the Next Generation Products (NGP) category, steady export volumes, and favorable foreign exchange tailwinds.

Domestic Market

In a notable departure from the historical structural decline of c.2% annually, South Korea’s total domestic tobacco market volume is projected to increase by 1% year-on-year in the second quarter of 2026. This unexpected stabilization is primarily propelled by strong volume growth within the next-generation products (NGP) category, which has successfully offset the ongoing secular contraction of traditional combustibles. For KT&G, this resilient domestic demand backdrop, combined with incremental market share gains, provides a highly supportive foundation for domestic revenue and helps mitigate broader volume pressures in the traditional portfolio.

Combustibles	Total domestic demand for combustible cigarettes, which had previously experienced a prolonged downward trend, demonstrated a cyclical rebound during the second quarter. KT&G is estimated to have mitigated broader industry volume pressures by securing incremental market share gains.
NGPs	The domestic NGP portfolio continues to achieve quantitative and qualitative growth. The overall NGP market penetration rate in South Korea rose to 24% (up from 22.4% in the prior year), with KT&G expanding its market share within this segment by an estimated 2.5pp year-on-year.
Margin Mix	Profitability is being structurally supported by a favorable product mix shift toward premium offerings; notably, the new Lil Able sticks command a higher average selling price (ASP) compared to standard sticks, helping to drive margin improvements.

International Markets

International operations are expected to serve as a core contributor to the second-quarter results led by several key factors:

Eurasian Demand	The overseas combustible cigarette division is projected to record historic high sales in Eurasia (Eastern Europe & Western Asia), sustained by stable end-consumer demand and strategic price adjustments.
CIS Region Realization	Within the CIS region, an expanding mix of high-unit-price products has lifted the regional ASP and improved net margins.
Overseas NGPs	Growth rates are projected to appear elevated on a year-on-year basis due to a low base effect, given that the corresponding period of the previous year was impacted by localized supply delays and revenue gaps.
FX Headwinds Turned Tailwinds	These foreign currency-denominated revenues are benefiting from a weaker won exchange rate environment, providing a positive conversion effect.

Beyond the core tobacco operations, supplementary business units are maintaining a focus on structural efficiency. In the health functional food (HFF) segment, softer international sales volumes are being counterbalanced by steady domestic revenues, while international subsidiaries prioritize profitability-driven operations over volume expansion.

Looking into the second half of 2026, the market is tracking the scaling of the company’s new initiatives in the nicotine pouch category and HFF segment with Altria. From a capital allocation perspective, expectations remain anchored on an upcoming update to the corporate shareholder return program. Reflecting the improved earnings visibility, analytical models suggest that the full-year dividend per share could expand up to ₩7,000-7,500 (up from ₩6,000 in the previous fiscal year), a trajectory that corresponds with foreign institutional ownership climbing to above 50% from 42% at the start of the year.

July 2026: KT&G Leverages Khyber Tobacco Partnership to Expand “Pine” Brand in Pakistan

In a major step toward expanding its global market footprint, KT&G has signed a Memorandum of Understanding (MoU) with Pakistan’s Khyber Tobacco Company Limited (KHTC). The agreement lays the groundwork for a proposed royalty licensing arrangement for KT&G’s “Pine Passion Sky” brand. Under the terms of the MoU, KT&G intends to grant Khyber Tobacco the rights to manufacture and market “Pine Passion Sky” within Pakistan, with the potential to expand into other mutually agreed international territories.

The agreement aligns directly with KT&G’s aggressive global expansion strategy, which focuses on leveraging local manufacturing capabilities to deepen market penetration in South Asia. By partnering with an established regional manufacturer, KT&G aims to efficiently scale the presence of its popular “Pine” brand family without the immediate need for heavy localized infrastructure investments.

To spearhead this expansion, KT&G has partnered with one of Pakistan’s most deeply rooted tobacco enterprises. Established in 1954 and publicly traded on the Pakistan Stock Exchange (PSX), Khyber Tobacco is a fully integrated manufacturer headquartered in Mardan, Khyber Pakhtunkhwa. The company manages the entire production pipeline – from tobacco leaf procurement and processing to final cigarette marketing – making its strong domestic distribution network and manufacturing capabilities an ideal match for KT&G’s premium portfolio.

The proposed transaction remains subject to the execution of definitive formal agreements, customary commercial conditions, and necessary regulatory approvals in the respective regions.

July 2026: Capital Group Increases Stake in KT&G Amid Strong Growth Outlook

Capital Research and Management Company has increased its equity stake in KT&G from 7.2% to 8.2%. According to data filed with the Financial Supervisory Service’s electronic disclosure system, the Los Angeles-based asset manager acquired an additional 1.04 million shares, bringing its total holding to approximately 8.5 million shares, valued at an estimated US$975 million. Capital Research and Management is a subsidiary of Capital Group, one of the world’s largest active asset management firms, which oversees approximately $3.3 trillion in assets under management (AUM).

The steady accumulation of shares by prominent, long-term global institutional investors to KT&G’s robust secular growth trajectory. The primary catalyst for this expansion is the company’s international cigarette division, which recently delivered record-high quarterly sales driven by both volume growth and strategic unit price increases. Furthermore, institutional interest is being sustained by KT&G’s proactive capital allocation strategies. The company has actively divested non-core real estate assets to fund enhanced shareholder return programs. This strategy, combined with a highly competitive next-generation product (NGP) portfolio, continues to strengthen the company’s investment thesis among value-driven, long-term global funds.

June 2026: Capital Group and BlackRock Increase Stakes in KT&G

Two of the world’s largest asset managers have increased their investments in KT&G, underscoring growing institutional conviction in the South Korean tobacco company. According to regulatory filings disclosed through South Korea’s DART system, Capital Research and Management Company, a subsidiary of Capital Group, increased its stake in KT&G from 5.61% in May to 7.21%, raising its holdings to 7.49 million shares. BlackRock also increased its ownership stake from 5.01% to 6.15% after acquiring an additional 467,350 shares, bringing its total holdings to approximately 6.38 million shares.

The recent stake increases by Capital Group and BlackRock have helped push KT&G’s foreign ownership ratio above 50%, highlighting the company’s growing appeal among global institutional investors. The purchases come as KT&G continues to deliver strong overseas cigarette growth, expand its international footprint, and return significant amounts of capital to shareholders.

With a new capital return program expected later this year and international operations increasingly driving earnings growth, KT&G’s combination of sustainable growth and attractive shareholder returns continues to resonate with long-term global asset managers.

June 2026: Foreign Ownership in KT&G Surpasses 51% as Global Institutional Interest Continues to Grow

KT&G is attracting increasing attention from international investors, with foreign ownership in the company now exceeding 51% and U.S.-based First Eagle Global Fund joining the ranks of its major shareholders. According to a recent regulatory filing, First Eagle Global Fund held a 5.02% stake in KT&G as of May 15, becoming the latest global institutional investor to surpass the 5% ownership threshold. Other major foreign shareholders include Capital Group, BlackRock, and the Government of Singapore Investment Corporation.

The filing highlights the continued presence of large international asset managers and sovereign investors in KT&G’s shareholder base. Given the company’s dispersed ownership structure and absence of a controlling shareholder, changes in institutional shareholdings are closely monitored by the market. The increase in First Eagle’s ownership percentage was driven by KT&G’s treasury share cancellations, which reduced the number of outstanding shares and increased the relative holdings of existing investors. As a result, the fund’s stake exceeded 5% despite a slight reduction in the number of shares held.

The rise in foreign ownership is widely viewed as reflecting confidence in KT&G’s business fundamentals and shareholder-friendly capital allocation policies. The company has benefited from continued growth in its international tobacco operations while maintaining an active shareholder return program that includes share buybacks, treasury share cancellations, and dividend increases. Recent financial results further supported investor sentiment. KT&G reported double-digit growth in both revenue and operating profit during the first quarter, driven primarily by strong performance in overseas tobacco markets.

KT&G also reaffirmed its commitment to shareholder returns as part of its broader strategy to enhance shareholder value. The combination of improving business performance, expanding international operations, and sustained capital return initiatives appears to be reinforcing KT&G’s appeal among global institutional investors.

May 2026: Foreign Investors Continue to Return to KT&G as Capital Group Builds Stake

A recent regulatory filing disclosed that Capital Group has acquired a 5.61% stake in KT&G, positioning the global asset manager among the company’s major foreign shareholders alongside BlackRock, First Eagle Investment Management, and GIC. Foreign investors now account for 45.5% of KT&G’s outstanding shares. The investment comes amid renewed international interest in South Korean equities and follows a strong re-rating in KT&G shares, which recently closed above the ₩180,000 level for the first time.

In February 2026, BlackRock, the world’s largest asset manager, increased its stake in KT&G to 5.01%, reinforcing its position as one of the company’s top five shareholders. IBK Industrial Bank of Korea remains KT&G’s largest shareholder with an 8.06% stake, followed by the National Pension Service at 7.74%.

Investor sentiment toward KT&G has been supported by continued strength in its overseas cigarette business, where the company has been delivering simultaneous growth in volume, revenue, and operating income – what management describes as “Triple Growth.” The performance reflects KT&G’s broader strategic transformation from a domestically focused player into a global tobacco company with expanding international exposure.

Against this backdrop, KT&G is increasingly viewed as well positioned to sustain industry-leading shareholder returns through a combination of dividends and additional share buybacks. After years of relatively limited foreign investor attention, global institutions appear to be reassessing KT&G’s long-term growth and capital return profile.

May 2026: KT&G Accelerates Real Estate Restructuring Amid Longstanding Activist Pressure

KT&G is accelerating the restructuring of its real estate operations as it seeks to reduce exposure to non-core businesses and sharpen its focus on its tobacco operations. KT&G plans to transfer several real estate assets, including a Gangnam building, to its wholly owned subsidiary Sangsang Stay through an in-kind contribution valued at ₩127.3 billion.

The move forms part of KT&G’s broader effort to streamline its asset portfolio and improve shareholder returns. The company previously announced plans to dispose of low-yield and non-core assets, targeting 57 real estate properties and 60 financial assets as part of a restructuring initiative expected to generate around ₩1 trillion in cash for shareholder returns. KT&G’s investment property holdings have been declining in recent years. On a book-value basis, investment properties decreased from ₩1.02 trillion in 2023 to ₩761 billion in 2024 and further to ₩665 billion in 2025.

Pressure to address KT&G’s extensive non-core asset holdings has persisted for years. In 2022, activist fund Flashlight Capital Partners (FCP) assessed that KT&G’s investment real estate was worth ₩2.2 trillion as of 2021 and argued that the company’s non-core business areas had become excessively large. Earlier, in 2006, activist investor Carl Icahn also urged KT&G to sell part of its real estate portfolio.

May 2026: KT&G Accelerates Independent Expansion of lil Across Asia-Pacific and Eurasia

KT&G is shifting its global heated tobacco strategy toward direct overseas expansion of its “lil” platform, marking a strategic evolution from its long-standing reliance on Philip Morris International (PMI) distribution. The company plans to prioritize Asia-Pacific and Eurasia as initial launch regions, leveraging existing cigarette distribution strength and subsidiary networks in these markets.

Previously, KT&G’s next-generation product (NGP) international growth was heavily anchored to a 15-year global partnership with PMI (signed in 2023), which enabled expansion into 34 countries by 2025. However, management now aims to transition toward a dual-track model, combining PMI-led global reach with KT&G-led direct market entry where it can control branding, positioning, and local execution.

The strategic rationale is rooted in KT&G’s existing international cigarette infrastructure. Overseas cigarette sales accounted for a growing share of the business, with Asia-Pacific alone representing the largest regional contribution. This network is now being positioned as a launchpad for lil, particularly in markets where distribution, regulatory familiarity, and brand presence already exist.

Domestically, KT&G argues it has validated product competitiveness, with lil holding a leading position in Korea’s heated tobacco category and achieving a 47.4% market share in core consumables. The company is also continuing platform expansion, including new iterations such as Lil Hybrid 4.0, which supports its ambition to scale internationally.

Overall, the shift signals KT&G’s intent to move from PMI-dependent global scaling to selective direct international commercialization, using existing cigarette infrastructure as a structural advantage to accelerate HTP penetration in priority regions.

May 2026: KT&G Accelerates Non-Core Asset Disposal, Front-Loads Liquidity Target and Reshapes Capital Return Strategy

KT&G has materially advanced its long-running program to monetize non-core assets, having achieved its target of approximately ₩1 trillion in proceeds well ahead of the original 2027 timeline. The company had previously outlined a plan to generate this amount through the disposal of 57 real estate properties and 60 financial assets, positioning the initiative as a structural shift toward more efficient capital allocation and stronger shareholder returns.

The execution has been faster than initially guided. KT&G has already completed the disposal of major real estate holdings, including the Seongnam Bundang Tower, Seoul Euljiro Tower, and the Courtyard Marriott Seoul Namdaemun Hotel in Jung-gu, Seoul, alongside the liquidation of selected financial assets. Management has indicated that while the primary liquidity target has been reached, additional asset sales remain under consideration depending on future cash flow and capital needs, suggesting the program is still flexible rather than fully closed.

Alongside the accelerated asset monetization, KT&G is entering a phase of structurally lower capital intensity. The company notes that its capital expenditure burden is declining sharply, with the CAPEX-to-revenue ratio expected to fall from an average of around 11% during 2023-2025 to approximately 2-3% in the 2026-2027 period. This reflects the conclusion of a large-scale investment cycle, resulting in a shift from heavy reinvestment toward structural surplus cash generation.

The combination of reduced capital expenditure requirements and realized proceeds from non-core asset disposals has significantly strengthened KT&G’s capacity for shareholder returns. Importantly, the company has explicitly linked these liquidity gains to capital return policy, with proceeds previously directed toward treasury share buybacks and cancellations, including large-scale repurchases and the full cancellation of previously held treasury stock.

Going forward, the implication is a more cash-rich, lower-investment corporate structure in which non-core asset monetization and reduced CAPEX jointly support a more stable and potentially higher base for shareholder distributions, particularly through continued share cancellation programs and a shift toward more attractive dividend policy.

April 2026: KT&G to Cancel Entire Treasury Share Holdings in ₩1.86 Trillion Move

KT&G announced plans to cancel all 10.87 million treasury shares it currently holds, representing a total value of ₩1.86 trillion (US$1.27 billion). The cancellation is scheduled to be approved at a board meeting on April 23. The company indicated that the decision reflects recent revisions to the Commercial Act, as well as a broader objective to enhance shareholder value. The move follows an earlier announcement made at a February 25 board meeting, held on the same day the so-called “Third Amendment to the Commercial Act” – which mandates the cancellation of treasury shares – was passed by the National Assembly. Separately, at its Annual General Meeting on March 26, KT&G confirmed an annual dividend of ₩6,000 per share (yield: 3.5%), marking an increase of ₩600 year-on-year.

March 2026: KGC Drops “Ginseng Corporation” Name in Corporate Identity Overhaul to Emphasize Global Expansion

KT&G’s Korea Ginseng Corporation is changing its corporate identity and will operate under the simplified name KGC, marking a major branding shift aimed at supporting the company’s global expansion and transformation into a broader health and wellness company. The company announced that it will officially change its corporate identity (CI) from “KGC Ginseng Corporation” to simply “KGC” starting April 1, 2026. This is the first corporate identity change in about 14 years and comes as the company celebrates its 127th anniversary. The new identity reflects the company’s ambition to move beyond its traditional image as a red ginseng producer and reposition itself as a global comprehensive health food company.

The new corporate identity retains the overall visual framework but replaces the full company name with the initials “KGC.” The logo uses a dark gray typeface intended to convey trust and stability, and it incorporates the “seed” symbol of its parent group, KT&G, representing growth and future expansion. The new branding will gradually be applied across advertisements, corporate communications, websites, and product packaging.

Strategically, the corporate identity change signals that the company wants to move beyond its traditional association with Korean red ginseng and position itself as a global health, wellness, and functional food company. While its flagship brand Jung Kwan Jang remains central to the business, the company is increasingly expanding into broader health supplements, functional foods, and international markets.

Overall, the transition from “KGC Ginseng Corporation” to simply “KGC” is intended to modernize the company’s image, reflect its evolving business structure, and support its long-term strategy of becoming a global health and wellness company rather than a company primarily associated with ginseng products.

March 2026: KT&G Annual General Meeting Focuses on Shareholder Returns, Treasury Share Cancellation and Governance Changes

At the 2026 Annual General Meeting, KT&G placed strong emphasis on shareholder returns, treasury share cancellation, and corporate governance reforms, with shareholders approving all major agenda items including financial statements, amendments to the articles of incorporation, director appointments, and treasury share-related proposals.

One of the most important topics discussed at the meeting was treasury shares. The company proposed cancelling all treasury shares it currently holds, equivalent to roughly 9.5% of total outstanding shares, a move aimed at increasing shareholder value and improving capital efficiency. The proposal was closely linked to broader changes in Korea’s commercial law and growing pressure on companies to improve shareholder returns and governance transparency.

At the same time, the AGM included proposals to amend the company’s articles of incorporation to allow the acquisition, holding, and disposal of treasury shares for managerial purposes such as new technology investment or financial structure improvement. These proposals generated some debate among governance groups and investors, who argued that the treasury share cancellation and treasury share management provisions should be clearly separated to avoid confusion among shareholders. The company responded that the disclosure was intended to clarify how existing treasury shares would be handled and prevent misunderstandings in the market.

During the meeting, KT&G CEO emphasized the company’s commitment to shareholder-focused capital allocation, including dividend growth, share buybacks, and treasury share cancellation. The company highlighted that dividends have increased steadily in recent years and reaffirmed its strategy to enhance corporate value through shareholder returns while continuing investments in growth areas such as next-generation products and overseas business expansion.

Overall, the 2026 Annual General Meeting reflected KT&G’s broader strategic direction: strengthening shareholder returns, improving corporate governance transparency, and maintaining long-term growth through new product development and international expansion. The treasury share cancellation plan and governance-related agenda items were the central themes of the meeting and attracted the most attention from investors and market observers.

March 2026: KT&G Expands Overseas Operations to Support Growth and Profitability

KT&G is advancing its international operations to strengthen core business performance and support future growth. The company is focusing on improving its profit structure by leveraging its global production and distribution network. It currently operates 16 overseas bases, including manufacturing facilities and corporate entities, with six subsidiaries in Russia, Indonesia, Uzbekistan, Kazakhstan, Taiwan, and Turkey, and five branch offices in Tajikistan, Kyrgyzstan, Mongolia, Europe, and China.

In total, KT&G operates five global manufacturing plants. A new production facility in Indonesia is expected to begin full-scale operations in the first half of the year, while a new factory in Kazakhstan has been completed to better align capacity with regional demand. In addition, a factory expansion in Türkiye was finalized in January 2025. With these developments, KT&G’s total annual overseas production capacity has reached approximately 65 billion cigarettes.

The company has also taken steps to strengthen its overseas value chain by optimizing production and distribution processes across key markets. As part of this effort, its Uzbekistan office has been converted into a legal entity. KT&G indicates that its expanded international footprint is contributing to performance. The company holds leading market positions in Mongolia and Tajikistan, while brands such as Esse in Indonesia and Bohem in Taiwan have gained traction in their respective markets.

Financially, KT&G reported revenue exceeding ₩6.5 trillion in 2025, with operating profit surpassing ₩1.3 trillion. Overseas cigarette sales have exceeded domestic sales, reflecting a continued shift toward international markets. Following this performance, the company has raised its growth expectations from single-digit to double-digit increases in both revenue and operating profit. In the most recent year, revenue and operating profit grew by 11.4% and 13.5%, respectively, compared to the previous year.

March 2026: KT&G to Open Branch Office in Guatemala to Expand Latin American Presence

KT&G is establishing a branch office in Guatemala City, marking its first operational base in Central and South America as part of a strategy to expand its presence in Latin America. The new branch will allow the company to shift from relying on third-party importers toward direct management of distribution and sales channels in the region. The office is expected to oversee local distribution, market research, price monitoring, and marketing coordination. The branch will also serve as a regional hub for expansion across Central and South America, helping KT&G strengthen its control over distribution and improve its competitive position in the region’s tobacco markets.

The Guatemala branch will also become KT&G’s first office anywhere in the Americas. While the company operates overseas corporations in Indonesia, Russia, and Taiwan, and maintains branch offices in Romania, Mongolia, and China, it previously had no active offices in the Western Hemisphere. The company established a U.S. subsidiary in the United States in 2010, but operations were suspended in 2021.

February 2026: KT&G Will Retire 9.5% of Shares Following Commercial Act Reform

KT&G announced the decision to cancel 10.87 million treasury shares, representing about 9.5% of its outstanding shares, in a move valued at approximately ₩1.95 trillion (US$1.37 billion). The cancellation positions KT&G as the first major company to act under South Korea’s newly revised Commercial Act. The decision underscores mounting pressure on listed firms to enhance shareholder returns by reducing share count and improving capital efficiency.

The move came hours after the National Assembly passed a third amendment to the Commercial Act aimed at strengthening shareholder rights and corporate governance. Under the revised law, companies must retire newly acquired treasury shares within one year and cancel existing holdings within 18 months of the law taking effect. The tighter rules are designed to prevent companies from stockpiling treasury shares for managerial control purposes and instead ensure excess capital is returned to shareholders, addressing the long-standing “Korea discount” in equity valuations.

February 2026: KT&G Crosses KRW 6 Trillion Revenue Threshold as Global Business Drives Record Results

KT&G announced its 2025 fourth-quarter and full-year results alongside its 2026 management guidance during an earnings call held on February 5. Fourth-quarter consolidated revenue reached ₩1.71 trillion, while operating profit rose to ₩248.8 billion, representing year-on-year growth of 10.1% and 17.1%, respectively. For the full year, revenue increased 11.4% to a record ₩6.58 trillion, and operating profit grew 13.5% to ₩1.35 trillion. Excluding a one-off labor-related cost of ₩70 billion, adjusted operating profit amounted to ₩1.42 trillion, up 19.4% year on year.

The strong performance reflects the company’s ongoing focus on strengthening global competitiveness, reinforcing core businesses, and prioritizing profitability-driven growth. Structural reforms, including the establishment of a global Company-In-Company (CIC) framework, have supported sustained earnings momentum and have been positively received by capital markets. Against this backdrop, KT&G’s share price reached a new intraday high of ₩164,000 in early February.

The global cigarette business was the primary driver of results, achieving record revenue, volume, and operating profit simultaneously. Segment revenue rose 14.6% year on year to ₩1.88 trillion. For the first time, global cigarette revenue exceeded that of the domestic business, accounting for 54.1% of total cigarette revenue. Sales volumes and average unit prices both posted double-digit growth, supported by strategic price increases. The Next Generation Products (NGP) business also maintained its growth trajectory, supported by new device and stick launches across domestic and international markets. NGP revenue increased 13.5% year on year to ₩890.1 billion, while stick sales volume rose 2% to 14.78 billion units.

Alongside the results, KT&G outlined its outlook for 2026. As part of the ₩2.4 trillion capital expenditure program announced in 2023, the Kazakhstan factory has commenced production, while a new Indonesian facility is scheduled to begin operations in March 2026. These investments are expected to accelerate the transition toward a globalized manufacturing footprints.

Building on expanded global production capacity, the company plans to enhance profitability in 2026 through cost-of-goods-sold reductions and further strategic price adjustments. KT&G is also targeting double-digit growth in both volume and value within its global cigarette business by broadening its business model to include original equipment manufacturing (OEM) and licensing. In parallel, the company intends to diversify its NGP portfolio to reinforce its tobacco business. This includes moving beyond a narrow focus on heated tobacco products to encompass a wider range of modern nicotine formats, such as nicotine pouches, supported by the acquisition of ASF (Another Snus Factory).

Based on continued expansion in global cigarettes, NGP portfolio diversification, and broader market development, KT&G has set FY26 targets of 3–5% revenue growth and 6–8% operating profit growth. The company also reiterated its commitment to shareholder returns, aiming to maintain a total shareholder return of at least 100% and to continue growing dividends, currently set at ₩6,000 per share. This policy is supported by a dividend payout ratio of 50% or higher and flexible share buybacks when valuations are deemed below long-term intrinsic value.

Overall, the results highlight KT&G’s ongoing shift from an export-oriented model toward a more direct, locally embedded global business structure, positioning the company for sustained growth and continued emphasis on shareholder returns.

February 2026: BlackRock Raises KT&G Stake to 5%

BlackRock, the world’s largest asset manager, increased its stake in KT&G to 5.01%, reinforcing its position as one of the company’s top five shareholders. Following the purchase of an additional 68.6k shares, BlackRock now holds 5.91 million KT&G shares in total. IBK Industrial Bank of Korea remains KT&G’s largest shareholder with an 8.06% stake, followed by the National Pension Service at 7.74%.

Meanwhile, Flashlight Capital Partners, a Singapore-based activist investment fund, has sold more than half of its roughly 0.5% stake in KT&G as the company’s share price reached new all-time highs. The reduction marks a shift in its activist stance following three years of intensive engagement with KT&G’s strategy and corporate governance.

January 2026: Industrial Bank of Korea Becomes KT&G’s Largest Shareholder

KT&G’s largest shareholder changed from National Pension Service (NPS) back to Industrial Bank of Korea (IBK). The change comes just five months after NPS became the largest shareholder in KT&G in August 2025 after acquiring additional KT&G shares.

The National Pension Service (NPS) sold 0.82 million KT&G shares in late-2025 and now holds 9.13 million shares – consequently, its stake fell from 8.16% to 7.74%. Industrial Bank of Korea owns 9.51 million KT&G shares, corresponding to a 8.06% stake.

December 2025: KT&G Takes Legal Action Against Illegal Cigarette Operators in India

KT&G filed a lawsuit in the Delhi High Court against 14 entities accused of illegal operations in the Delhi-NCR region after coordinated raids uncovered counterfeit ESSE cigarettes at several wholesale locations. Working in coordination with the enforcement authorities, KT&G aims to disrupt illicit supply chains, protect consumers, uphold market integrity, and prevent counterfeit cigarettes – which may evade health warnings and use unregulated materials – from spreading. KT&G also plans to expand enforcement efforts to other major Indian cities and pursue strong civil and criminal measures against the parties involved in producing or selling counterfeit products.

September 2025: KT&G Investor Day

At the Investor Day (September 23, 2005), KT&G underlined its transformation into a global player and emphasized the success of a localization-focused strategy which has enabled KT&G to achieve five consecutive quarters of “triple growth” in revenue, operating profit, and sales volume in its global cigarette business. In the first half of 2025, global cigarette segment delivered +15.5% volume and +22.1% pricing/mix growth, resulting in +41% revenue and +128% operating profit growth. The strong perfromance of international cigarette business fueled the Group level operating profit to +24% growth in the same period. KT&G credited the business momentum to higher export prices, a growing share of premium products, and cost efficiencies from transitioning to a global manufacturing structure – which will anchor long-term profitability. KT&G also laid out ambitious financial targets, forecasting ₩6 trillion revenue for the first-time and a double-digit growth in operating profit for 2025

KT&G upgraded the principle of capital allocation, which strengthens corporate growth and shareholder return at the same time by efficiently allocating excess capital generated in the future. The new strategy commits to a minimum dividend yield, with a payout ratio above 50%, and flexible repurchases when shares trade below intrinsic value. If the share price is undervalued compared to the long-term intrinsic value, the company will make a flexible purchase of treasury stocks throughout the year.

KT&G will raise its annual dividend per share to ₩6,000 won, ₩600 won higher than last year, while pursuing additional share buybacks and cancellations worth ₩260 billion thanks to the financial resources raised through the liquidation of non-core real estate assets. KT&G has so far completed the retirement of 10.4% of its treasury stocks compared to the total number of issued shares as of the end of 2023. In the 2024-27 period, KT&G commits to return more than 100% of its net income to shareholders in the form of share repurchases and dividends.

Beyond financial performance, KT&G highlighted new strategic moves to diversify and secure future growth. The Company announced an expanded partnership with Altria, including the joint acquisition of Sweden-based Another Snus Factory, producer of the LOOP nicotine pouch brand. Through this partnership, KT&G gains a foothold in the fast-growing nicotine pouch segment and access to Altria’s U.S. distribution capabilities, while leveraging its own global network to expand LOOP and Altria’s on! brand across Europe, the Middle East, and Asia-Pacific. The companies also agreed to explore opportunities in health functional foods through KT&G’s ginseng subsidiary, KGC, signaling KT&G’s intent to broaden beyond traditional tobacco.

Taken together, the event underscored KT&G’s shift from a domestic-focused cigarette company into a globally diversified nicotine and wellness player. With steady international growth, aggressive shareholder returns, and a bold push into nicotine pouches and adjacent categories, the company positioned itself as a more dynamic and competitive force in the global tobacco and reduced-risk product landscape.

Download K&G 2025 Investor Day presentation

September 2025: KT&G and Altria jointly acquires Another Snus Factory (ASF)

KT&G and Altria jointly acquired Another Snus Factory (ASF) for SEK1.76 billion (US$186 million). For the period ending December 31, 2024, ASF reported total revenue of SEK 655 million (US$62 million) and net income of SEK 3.65 million (US$0.35 million). As of December 31, 2024, ASF reported total assets of SEK 412 million (US$37 million). According to K&G, ASF’s Loop nicotine pouches command a top-3 position in the Nordics.

KT&G executed the initial acquisition of a 100% stake in ASF and, subsequent to the Global Collabration Agreement with Altria, KT&G and Altria owns a 51% and 49% stake in ASF, respectively. KT&G will finance the acquisition from its existing cash position and foreign currency bonds issued in the first half of 2025. At the 2025 Investor Day, KT&G also shared a tentative expansion plan for the ASF business, covering the European, Middle Eastern and South-East/East Asian markets. The expansion is also likely to bring Altria’s on! and on! Plus nicotine pouches to these markets.

September 2025: KT&G continues to dispose non-core real estate assets

KT&G sold the Euljiro Tower, located in Seoul’s central business district, to a domestic shipping company for ₩120 billion (US$86 million) – at a price about ₩30 billion lower than initially expected. KT&G acquired the building from Golden Bridge Partners for ₩61.2 billion in 2014. This sale resulted in a profit of nearly ₩60 billion after 10 years.

Meanwhile, KT&G is accelerating the disposal of non-core assets to strengthen competitiveness in its core tobacco business and increase shareholder returns. Adding in the sale of Bundang Tower in Seongnam for ₩127.4 billion in 2024, KT&G secured nearly ₩250 billion Korean won in cash in two years. Currently, the Company is negotiating the sale of the Courtyard Marriott Seoul Namdaemun hotel in Jung-gu, Seoul for around ₩200 billion. KT&G is also exploring for the sale of real estate assets in Daegu, Sejong and Busan. KT&G plans to dispose of a total of 57 properties by 2027 to secure about ₩1 trillion (US$720 million) in cash.

September 2025: KT&G enters into agreement with Altria to pursue long-term adjacent growth

KT&G entered into a non-binding Global Collaboration Memorandum of Understanding (MoU) with Altria to use the combined complementary strengths and offerings in the joint pursuit of long-term growth opportunities with modern oral nicotine products, non-nicotine products and operating efficiency in traditional tobacco.

As part of the collabration,

– KT&G and Altria will explore opportunities to contribute their respective resources and capabilities to expand the global demand for nicotine pouch products. These efforts may include the expansion of the on! and on! PLUS product portfolio to select countries, and/or strategic transactions in the modern oral space. As an initial step in this exploration, an Altria subsidiary signed a definitive agreement with KT&G whereby, concurrent with KT&G’s acquisition of Another Snus Factory Stockholm AB (ASF), a Nordic-based nicotine pouch company, Altria’s subsidiary will acquire an ownership interest in ASF. ASF owns the LOOP brand internationally.

– Korea Ginseng Corporation (KGC), a KT&G’s subsidiary, an Altria subsidiary will jointly explore opportunities in the U.S. with a focus in the growing energy and wellness segment. The exploration will seek ways to apply KGC’s product expertise and capabilities alongside our deep consumer insights and established go-to-market infrastructure.

– In addition to the focus on innovative nicotine and non-nicotine products, KT&G and Altria have agreed to jointly pursue ways to optimize operating processes for traditional tobacco products to benefit the competitiveness of each company in their respective home regions.

KT&G states that through this collaboration, a path to growth in next-generation tobacco products is secured by expanding the business from cigarettes to nicotine pouches and other areas. Altria states that the complementary market experience and capabilities of two companies can accelerate the pursuit of long-term adjacent growth goals across international regions and adjacent product categories.

September 2025: Soaring leaf import costs continue to put pressure on KT&G’s profitability

In 2024, imported leaf tobacco accounted for 84% of KT&G’s leaf tobacco purchases. Domestic subsidiaries of global tobacco companies, Philip Morris International (PMI) and British American Tobacco (BAT), rely entirely on imported leaf tobacco. Up to 2025, imported leaf tobacco was cheaper than domestically produced tobacco, helping reduce production costs. In 2021, the imported price of leaf tobacco was ₩5,558, about half the domestic purchase price (₩9,814). However, while the price of domestic leaf tobacco remained largely unchanged over the past four years, the price of imported leaf tobacco has doubled. This is due to poor crops caused by abnormal weather conditions such as heavy rains in major leaf tobacco producing countries like Brazil and India.

As the price of imported leaf tobacco soared, the cost burden on KT&G is increasing. The cost-to-sales ratio of KT&G’s manufactured cigarette division increased from 38.6% in 2020 to 47.9% in the first half of 2025. In addition, the South Korean Government is considering to raise the cigarette taxes for the first time in 10 years. The upward pressure on manufacturing costs coupled with higher taxes could lead to a substantial increase in cigarette prices in South Korea.

September 2025: KT&G announces further European expansion with market entry in Bulgaria

KT&G, in line with its global strategy of European footprint expansion, announced the entry into the Bulgarian market with the launch of 2 products under the superslim ESSE brand. This decision follows the successful product launches in Germany, Spain, Portugal and Romania in 2024/25. The launch in Bulgaria is in partnership with KTI (KT International S.A) via its local distributor Tobacco Trade. Products will be sold through both the independent retailers and Key Account network. Previously, KT&G signed an exclusive manufacturing and distribution agreement for its products with the Bulgarian tobacco manufacturer KTI in order to expand European market presence. Through the agreement, KTI has been granted the exclusive manufacturing and distribution rights to KT&G’s major brands including ESSE in Europe.

The ESSE brand was first introduced in Korea in 1996. Starting with expansion to the Middle East and Russia in 2001, the list of export destinations has continuously grown to 90 markets including Indonesia, Latin America, and Africa. The cumulative global sales volume since the first launch has reached 430 billion sticks as of 2024. Currently the brand owns a third of the global Superslim market and is the world’s top-selling Superslim brand.

August 2025: National Pension Service becomes KT&G’s largest shareholder

National Pension Service increased its stake in KT&G from 7.50% (9.16 million shares) to 8.16% (9.95 million shares) through on-market purchase and became the KT&G’s largest shareholder. Meanwhile, Industrial Bank of Korea, previously the largest KT&G shareholder, holds 7.8% stake in KT&G with 9.51 million shares.

July 2024: KT&G awarded a service contract to ITM Semiconductor for lil Hybrid 4.0 devices

ITM Semiconductor announced the signature of a service contract with KT&G for the lil Hybrid 4.0 devices. The new device is scheduled to be released next year and has significantly upgraded functions compared to the lil Hybrid 3.0 device, such as ultra-fast charging, shortened preheating time, increased liquid capacity and remaining cartridge liquid display. With this additional order, ITM Semiconductor expects to further expand its electronic nicotine delivery (END) device lineup and significantly increase pod production volume. ITM Semiconductor’s END business recorded sales of ₩117.2 billion (US$86 million) in 2024, up 22% year-on-year. Production for the lil Hybrid 3.0 devices will continue in 2025 and ITM anticipates significant sales growth when the production for the new device starts next year.

Meanwhile, ITM established an electronic nicotine delivery device manufacturing plant in Cikarang, Indonesia (50km southeast of Jakarta) in order to increase the production capacity for new KT&G models. The facility has a total floor area of 9,500 m² and will start manufacturing devices at the end of 2025.

June 2025: KT&G is in negotitions to acquire a nicotine pouch company

KT&G is in negotiations to acquire a nicotine pouch company in Northern Europe (presumably, Sweden). The acquisition price could be in the range of ₩200-300 billion (US$150-200 million). KT&G’s last overseas acquisition was a 60% stake in Indonesian cigarette manufacturer, Tristatti for ~₩140 billion (US$125 million) in 2011.

In parallel, KT&G is working on the sale of real estate assets such as Courtyard Marriott Seoul Namdaemun Hotel and KT&G Euljiro Tower. The Courtyard Marriott Seoul Namdaemun Hotel has been operated through Sangsang Stay, a wholly owned subsidiary of KT&G, since 2016. The combined sale price for the two properties could be in the range of ₩200-350 billion (US$150-250 million) – large enough to finance a meaningful acquisition in the nicotine pouch category.

In a regulatory filing, KT&G stated that they are exploring various possibilities, including external partnerships, in-house development and acquisitions as part of their diversification strategy in new (modern) nicotine products. As part of the diversification strategy, KT&G is also planning to expand into the vape category and introduce an upgraded lil hybrid device (heated tobacco & vape), lil Hybrid 4.0, with an expanded e-liquid capacity.

May 2025: KT&G enters the Indian market

KT&G enters the Indian market through a strategic partnership with local distributor Kedara Trading. The move marks a significant milestone in KT&G’s strategy to expand in Asia, particularly in high-growth markets. On June 2, 2025, KT&G will launch four premium ESSE Superslim products in India. Four additional products will be introduced later, taking the total number of brands to the Indian market to eight. Distribution will begin from metro cities with plans to expand to other major urban centers as well.

KT&G and its Indian partner Kedara will make ESSE products available through the general trade network of paan shops, quick commerce platforms and modern retail stores. Quick Commerce is an increasingly popular fast delivery platform in India, especially among urban consumers seeking convenience and quick access. By leveraging these platforms, KT&G and Kedara aim to ensure faster product availability and stronger visibility among digitally active, brand conscious customers. KT&G plans to gradually strengthen its presence in India by adapting to local market preferences while offering competitively priced premium products.

By 2024, KT&G markets 870 products in 148 countries and aims to become a truly global enterprise. Indonesia (9.6 billion sticks, accounting for over 20% of overseas sales), Mongolia (2.35 billion) and Taiwan (1.1 billion) are the top markets for KT&G in Asia. The United Arab Emirates (UAE) is the KT&G’s largest export destination with shipments over 3,000 metric tons in Q1 2025 (more than doubling year-on-year basis). KT&G products are reexported throughout the Middle East from the UAE.

May 2025: KT&G completed the relocation of lil manufacturing from Vietnam to Malaysia

Lil series, including the Lil Hybrid 3.0, were produced in Vietnam by third-party partners. In November 2024, the Vietnamese Government banned the production, importation, distribution, marketing, sales and use of e-cigarettes. As a result of the Vietnamese regulatory change, production at the Hanoi site of Irentec, KT&G’s manufacturing partner, was halted in December 2024 and KT&G suspended the sales of lil Hybrid 3.0 devices in South Korea in February 2025.

KT&G announced that the relocation of lil manufacturing line to Malaysia is completed and the distribution of lil Hybrid 3.0 devices in South Korea is back to normal ahead of the plan (- intially foreseen to be normalized by June 2025).

April 2025: KT&G seeks to acquire a Japanese ginseng company

KT&G is seeking to acquire a Japanese ginseng company after dismissing the ₩1.9 trillion (US$1.3 billion) buyout offer for its wholly owned unit, Korea Ginseng Corp (KGC) from the activist fund, Flashlight Capital. KT&G has recently sent requests for proposal to major accounting firms and investment banks to search for potential acquisition targets among ginseng and red ginseng suppliers in Japan. Given the relatively small size of Japanese ginseng producers, investment bankers estimate any deal KT&G could strike would be valued at between ₩100 billion and ₩200 billion (US$70-140 million).

In 2024, KT&G spent ₩9 billion (US$6 million) to acquire Centralpharm, a Korean manufacturer of health functional foods such as probiotics and vitamins. KGC is known for its signature Jung Kwan Jang brand and is the largest supplier of red ginseng (a popular health supplement) in South Korea.

Seperately, KT&G issued its first foreign currency bond worth US$300 million. The maturity is a 3-year fixed-rate bond (FXD) and the spread is 118bp more than the US Treasury yield of the same maturity. KT&G initially set the initial guidance rate at 155bp, but amid large-scale orders and a positive response from global institutions, managed to lower the spread by 37bp. Most recently, US 3-year Treasury yield was 3.799%.

April 2025: KT&G will sell Courtyard Marriott Seoul Namdaemun Hotel as part of its ongoing efforts to off-load real estate assets

KT&G is moving forward with the sale of Courtyard Marriott Seoul Namdaemun Hotel, located in the heart of Seoul’s Jung-gu district. KT&G issued a Request for Proposal (RFP) to real estate consulting firms, accounting firms, and other relevant parties as part of the sale process for the hotel. The move is as part of KT&G’s strategy to divest non-core assets and raise ~₩1 trillion ($700 million) cash. Recently, KT&G also conducted a sale auction for its prime office building, KT&G Euljiro Tower, located in the Seoul Central Business District.

January 2025: KT&G expands the production capacity at Turkish plant

KT&G announced the completion of production capacity expansion in Turkey to meet the growing demand in North Africa and Latin America. The expansion started in April 2024 and added two new production facilities to the factory, increasing its total ground area by 1.5 times to 25,000 square meters and effectively doubling the production capacity. With the expansion, the four facilities can now produce up to 12 billion cigarettes annually. KT&G established the Turkish factory in Tire, Izmir as its first overseas manufacturing plant in 2008. KT&G is also making major investments in Indonesia and Kazakhstan to expand its manufacturing footprint overseas¹.

November 2024: KT&G rejects the Activist Investor’s offer for its Ginseng business

KT&G officially rejected the Flashlight Capital Partners (FCP)’s ₩1.9 trillion (~US$1.4 billion) offer to acquire Korea Ginseng Corporation (KGC), a fully-owned subsidiary of KT&G. KT&G also stated that FCP’s citation of ₩1.2-1.3 trillion valuation mentioned by KT&G at the 2023 Investor Day is misleading. KT&G clarified that the aforementioned figure is merely a reference to some sell-side analysts’ evaluations and does not fully reflect KGC’s real value. KT&G sees ginseng as one of its 3 core focus businesses, alongside with international cigarettes and Next Generation Products (mainly, heated tobacco).

FCP’s offer was mostly perceived as lacking sincerity and reality in the Capital Markets due to FCP’s track record in making excessive shareholder proposals. Moreover, it is uncertain whether FCP has sufficient capital to pay ₩1.9 trillion to acquire KGC.

November 2024: KT&G expands presence in Europe

KT&G began its full-scale expansion into Europe. KT&G first launch its super-slim cigarette brand, ESSE, in Romania in April 2024. Expansion into Spain, Portugal and Andorra followed the Romanian launch.

In 2023, KT&G introduced a company-in-company (CIC) system for each region with the aim of accelerating growth in overseas markets, especially in Eurasia and Asia-Pacific, through expanded local distribution coverage. At the end of 2023, KT&G sells 717 products in 143 countries and employs 5,184 people. KT&G aims to become a Global Top 4 player by 2027, overtaking Imperial Brands.

October 2024: Activist investors, Flashlight Capital Partners offers US$1.4 billion for KT&G’s Ginseng business

Flashlight Capital Partners (FCP), a shareholder of KT&G, announced that it has submitted a Letter of Intent to KT&G’s Board of Directors (BoD) to acquire 100% of the shares in Korea Ginseng Corporation (KGC), a subsidiary of KT&G². Flashlight offered ₩1.9 trillion (~US$1.4 billion) for KGC which represents a 50% premium over the ₩1.2-1.3 trillion valuation mentioned by KT&G at the 2023 Investor Day.

FCP hopes to develop Korean ginseng into a global brand, comparable to Mānuka honey or Maotai, by decoupling it from the tobacco business. FCP notes that KGC’s operating profit was halved from 2019 to 2023 and KT&G’s 2024 guidance indicates further decline despite the growing global demand for health food. Moreover, FCP claims that KGC’s value is not reflected in KT&G’s stock price and KT&G’s board rejected the spin-off of KGC in 2023 with no clear rationale. Since 2022, FCP has been advocating for either a spin-off or sale of KGC. However, according to KT&G, KGC is not undervalued and a spin-off from KT&G would result in loss of business synergies.

KGC was established in 1999 as a 100% subsidiary by KT&G through an “in-kind contribution”. Cheong Kwan Jang emerged as KGC’s flagship brand with more than 80% market share in Korean ginseng market. KGC recorded ₩1.39 trillion revenue and ₩116 billion operating profit in 2023 (i.e. only 8.4% operating margin). The acquisition offer price of ₩1.9 trillion won corresponds to a multiple of 10x KGC’s estimated EBITDA.

The practice of informing BoD about an acquisition intention does not exist in South Korea and KT&G’s BoD is not officially required to respond to the FCP’s offer. It is also unlikely that KT&G will agree to spin-off or sell KGC. Nevertheless, through this proposal, FCP presumably aims to call attention to the undervaluation of KGC (once again) and put pressure on the KT&G BoD & Management.

October 2024: KT&G invests in Indonesia to develop a production hub for Asia-Pacific and Middle East

Growth-hungry KT&G budgeted ₩3.5 trillion (US$2.6 billion) in capital expenditures for ramping up its manufacturing capacity in Korea and abroad. As part of expansion drive, KT&G will invest ₩600 billion (US$450 million) by 2026 to build two new factories in Indonesia, solidifying its growing presence in the country and developing an export hub for Asia-Pacific and Middle East markets³.

KT&G had the groundbreaking ceremonies for its second and third Indonesian factories in April 2024 in Surabaya. Upon completion, these two plants will produce 21 billion cigarettes per year and Indonesia will become KT&G’s largest overseas production base with a combined annual capacity of 35 billion cigarettes.

KT&G first entered the Indonesian market in 2011 following the acquisition of the local tobacco company, Trisakti. In 2023, KT&G sold 9.55 billion cigarettes in Indonesia – implying a 159-fold increase since the Trisakti acquisition. Indonesia is now KT&G’s largest market outside Korea, accounting for 22.6% of its total export volume in 2023. KT&G is the fourth-largest tobacco company in Indonesia with 4.4% market share, ahead of British American Tobacco and Japan Tobacco.

KT&G’s growth in Indonesia has been fueled by the introduction of new cigarette products. For instance, KT&G launched Esse Berry Pop, a kretek version of its key Esse brand, in 2017 and the local sweet tea (Teh Manis) inspired Juara in 2018. KT&G released 21 new products in 2021, which drove the Indonesian sales volume growth from 4.84 billion sticks in 2021 to 8.48 billion sticks in 2022. KT&G added another 19 products to its Indonesian portfolio in 2022-23. KT&G aims to continuously refresh and strengthen its lineup by launching new products, including the 2024 release of Esse Change Icy Double and Juara Click Mango.

September 2024: KT&G launches lil SOLID 3.0, featuring boost mode and smart-on functionality

Lil Solid 3.0 is introduced as an upgrade to lil Solid 2.0, launched in 2020, in terms of user eperince and device design. For further details: lil.

September 2024: KT&G launches “lil Hybrid 3.0 Cargo Container Edition”

KT&G launches “lil Hybrid 3.0 Cargo Container Edition”‘ in collaboration with Cargo Container, a camping brand for campers who want to escape from the complexity and hustle of urban life and embark on their own journey into the rugged wilderness. For further details: lil.

August 2024: Off-loading the Real Estate assets

KT&G continues to off-load its real estate assets to secure funds for investment in the core tobacco business and to improve asset management efficiency. KT&G selected Seoul-based Pebblestone Asset Management as the preferred bidder for the Bundang Tower in Seongnam. The estimated sales price is ₩120 billion (US$90 million) for the building which KT&G acquired in 2018 for ₩68.5 billion (~US$60 million). KT&G is also considering the sale of Euljiro Tower in northern Seoul.

KT&G invested the earnings from its core tobacco business in real estate since the 2010s. The company developed residential complexes, invested in major shopping malls and acquired office buildings in the greater Seoul metropolitan area. However, given the sustained weakness in the Korean property market, KT&G is reviewing the mid-to-long term business direction for the Real Estate division and re-structuring the business framework with a plan to off-load inefficient assets. In the first half of 2024, Real Estate division generated 4.6% of the Group revenue and only 1% of the Group operating profit. In FY24, KT&G expects the real estate revenue and operating profit to decline by 35% and 93%, respectively.

August 2024: KT&G Share Price on the Move

After delivering a turnaround in Q2 2024 that is quicker and better than the wildest expectations, KT&G shares are attempting to take out the key KRW100,000 level. Recall: KT&G: Q2 2024 Results.

Local media sources speculate that the share price is driven up by the strong foreign buying. Within a striking distance to a new 5-year high (KRW106,500; October 2019), KT&G shares could attract further buying interest as the stock performance (if sustained) makes the headlines beyond South Korea.

A multiple expansion for KT&G (as a proven growth business) could be in the cards – which would take KT&G (P/E ~12.5) to the same league as PMI and Japan Tobacco (P/E>15) in terms of valuation.

July 2024: Manufacturing & Distribution Agreement with KTI

KT&G and KT International announced an exclusive manufacturing and distribution agreement to manufacture and distribute KT&G’s products in Europe for three years. South Korea-based KT&G is the fifth-largest tobacco company in the world by sales volume and is best known for its ESSE brand (i.e. the best-selling super-slims brand in the world). Bulgaria-based KTI was established in 2008 following the privatization of the Bulgarian State Monopoly’s production facilities in Plovdiv. Best known for its The King and Corset brands, KTI has 25 billion sticks installed capacity and operates in 70 markets.

The agreement was signed on October 20, 2023, and kept confidential as the two companies worked to structure a competitive business model and develop a product portfolio strategy. KT&G and KTI also agreed to a market entry plan to expand into strategic markets in the Western European region. KT&G and KTI will initially focus on ESSE products, and the product range and expansion plan will be announced later.

March 2024: “Victory for Everyone”

Despite the opposition from the top shareholder, the Industrial Bank of Korea (IBK), Singapore-based activist fund, Flashlight Capital Partners (FCP) and global proxy adviser, Institutional Shareholder Services (ISS), Kyung-man Bang secures the CEO position at the AGM with overwhelming shareholder support. However, the Board Member (outside director) recommended by IBK and supported by Flashlight Capital is also appointment by the shareholders in a balancing act. Thereby, KT&G 37th AGM turned out to be a victory for everyone.

Following the AGM, the new CEO pledged to boosting KT&G’s market value and building trust with the shareholders. FCP welcome the appointment of the first “truly” independent director, committed to advancing shareholder interests. FCP also requested action in the top-priority areas over the next three months:

– Link Compensation to Performance

– Enhance Accounting Transparency (overseas profitability, illicit tobacco risks, under-performance of lil in the key Japanese market)

– Prevent Illegal Treasury Share Giveaway

– Globalize Ginseng Business

– Stop Asset Management Business (excess cash invested in real estate and private equity funds).

March 2024: Countdown to the AGM

Heading towards the AGM, Bang’s approval as the next KT&G CEO is becoming more uncertain. KT&G’s largest shareholder, Industrial Bank of Korea (IBK, 6.9% stake), already declared its opposition. Moreover, the global proxy advisor, Institutional Shareholder Services (ISS), recommended KT&G shareholders to vote against the appointment of Bang. ISS also endorsed the Board Member (outside director) recommended by IBK and supported by Flashlight Capital (1% stake) – instead of the two candidates put forward by KT&G.

The pro-Bang camp, Korea’s National Pension Service (the second largest shareholder with 6.3% stake) and KT&G “friendly” groups (with an estimated stake of 13%, including the in-house labor welfare fund and the employee stock ownership association) gathers close to 20% stake.

Bang’s approval hinges on the votes of foreign shareholders (44.3% combined stake; likely to be more receptive of the recommendation of ISS).

Recall: Singapore-based, Flashlight Capital is leading shareholder activism against KT&G since 2022.

February 2024: CEO appointment update (III)

The CEO Candidate Recommendation Committee selects Kyung-man Bang, currently KT&G’s Chief Operating Officer, as the final CEO candidate following face-to-face interviews with the four candidates on the second shortlist. The Committee assessed the shortlisted candidates based on the five key competency criteria: management expertise, global acumen, strategic thinking skills, stakeholder communications and universal morality & ethical awareness.

Bang joined KT&G in 1998 and played a key role in formulating the company’s mid-to-long term growth strategies across diverse business areas that focus on three core business areas: Next Generation Products, Health & Functional Foods and Overseas Combustibles. His notable achievements include the launch of the ESSE Change brand and expanding KT&G’s overseas market presence to over 100 countries. Pending approval at the AGM (on March 28, 2024), Bang will officially assume the role for the next three years with the aim to overcome market limitations and shape KT&G into a global top-tier company.

We will follow whether the activists (seeking a shake-up at the helm of the company) will be able to drive a powerful opposition at the AGM.

February 2024: “Esse – World’s #1 ultra-slim cigarette brand”

Launched in November 1996, Esse sold 50.8Bn sticks in 2023: 21.9Bn sticks in Korea and 28.9Bn sticks abroad in 2023 – making it the largest ultra-slim cigarette brand in the world⁴. Esse’s total global sales topped 900Bn sticks (496.5Bn domestic plus 405.1Bn overseas) since the launch and its annual overseas sales exceeding its domestic sales since 2015.

Esse differentiates itself with a slim design, low-tar profile (1mg), application of innovative technologies (such as odor reduction) and steady expansion in taste dimensions. Esse maintains its leadership the overall Korean market since 2004 (i.e. ~35% SoM in 2023). KT&G started exporting Esse to the Middle East and Russia in 2001 and the brand is now sold in more than 90 countries. Esse currently makes about one-third of global ultra-slim cigarette sales.

January 2024: CEO appointment update (II)

 KT&G Governance Committee finalized the first shortlist of CEO candidates on January 31, 2024 and recommended the finalized list to the CEO Candidate Recommendation Committee. The first shortlist includes 8 candidates in total: 4 external and 4 internal.

The CEO Candidate Recommendation Committee is composed entirely of outside directors, without the participation of the incumbent CEO. The Committee will carry out an in-depth assessment on these 8 candidates and finalize the second shortlist of 3-4 candidates by mid-February. Then, the Committee will conduct face-to-face interviews to select & report the final CEO candidate to the Board by the end of February. The Board will table the CEO selection subject at the AGM in late March.

January 2024: Shareholder activism

In a new chapter of its offensive campaign⁵, Singapore-based activist fund Flashlight Capital Partners (FCP) sent a request to the KT&G Audit Committee recommending a lawsuit against KT&G’s board of directors to claim compensation worth ~₩1Tn (US$0.75Bn). The fund’s position is that former and current KT&G executives donated (10.85Mn) treasury shares to the company’s public interest foundations for the purpose of strengthening management control and that the board of directors did not properly check and monitor the process. FCP believes that KT&G caused serious damage to shareholders by buying back treasury shares and donating them to the foundations headed by the current/former CEOs – instead of using the money to enhance the shareholder value. Currently, KT&G holds 15.3% of the company’s shares. KT&G Welfare Foundation (2.23%) and KT&G Scholarship Foundation (0.63%) also hold shares.

FCP plans to file a civil lawsuit directly on behalf of shareholders to claim compensation from the board of directors if the KT&G Audit Committee does not file a lawsuit within a month in accordance with the Commercial Act. Depending on the outcome of the lawsuit, criminal proceedings are reportedly being considered for alleged dereliction of duty.

January 2024: KT&G under investigation in the US for omitting harmful product details

KT&G confirmed that an investigation is under way since 2021 by the US Department of Justice (DOJ) and the Food and Drug Administration (FDA) for allegedly omitting information on harmful substances in the cigarettes sold in the US⁶. The company is facing allegations of violating tobacco regulations set by the US FDA, including the submission of inaccurate data during the approval and review process of tobacco products. KT&G stated that they received an order from the DOJ to submit a comprehensive document on the regulatory compliance status of their products, but (so far) they haven’t received a sanction or a notification regarding the results.

KT&G launched Carnival in the US in 2007, Timeless Time in 2011 and This in 2017. Local media reports suggest that KT&G is being investigated for the Carnival and Timeless Time brands. Internal company documents (seen by the local media) reveal that the submissions to the FDA intentionally omitted harmful substances such as diacetyl and levulinic acid found in these cigarettes.

KT&G halted its US operations in December 2021, citing “intensified regulations and heightened market competition”. The investigation raises concerns over the possibility of KT&G failing to retrieve long-term deposits (i.e. payments made to escrow by a manufacturer not participating to MSA) of ₩1.54Tn ($1.15Bn) as a result of a possible penalty.

January 2024: CEO appointment update (I)

Amid shareholder activism and stating that KT&G is at a “crucial juncture requiring fresh leadership for global advancement and transformative changes within the company”, K&G’s incumbent CEO (also K&G’s longest-serving CEO) announced his intention not to seek reappointment for a fourth term. Thereby, the KT&G Governance Committee excluded him from the long-list of CEO candidates which comprises 24 individuals, including 14 external candidates and 10 internal candidates.

The CEO appointment process is expected to unfold over a period of three months, following a three-step procedure:

(1) Comprehensive assessment of the long-listed candidates by the Governance Committee which is composed of 5 external experts (end of January 2024)

(2) Selection of the final CEO candidate by the CEO Candidate Recommendation Committee (end of February 2024)

(3) Approval of the final CEO candidate at the General Meeting of Shareholders (end of March 2024). 

December 2023: CEO nomination process

Activist shareholder, Flashlight Capital expressed disappointment in the performance of KT&G’s CEO, who has held the position for nine years (three consecutive terms), and demanded a fair and transparent CEO nomination process: Flashlight Capital’s YouTube video, addressing the KT&G shareholders.

Flashlight Capital notes that

– over the past nine years, KT&G stock fell by 19% while the KOSPI index rose by 26%

– the Management pursued volume at the expense of profit (40% revenue growth coupled with a 17% decrease in operating profit)

– “lack of profit motive” is the primary cause for the stock’s more than 50% discount relative to its peers.

Subsequently, KT&G announced that the Board of Directors enhanced the fairness and transparency of the CEO appointment process by removing a clause that allows the incumbent CEO to be considered in preference to other candidates. KT&G will proceed with the process of appointing a (new) CEO in Dec 2023.

References:

1. https://www.koreaherald.com/article/10402784 ↩︎
2. https://www.businesswire.com/news/home/20241013442141/en/Flashlight-Capital-Proposes-1.4-billion-Acquisition-of-KTG%E2%80%99s-Ginseng-Business ↩︎
3. https://koreajoongangdaily.joins.com/news/2024-10-01/business/industry/KTG-invests-big-to-turn-Indonesia-into-Asia-Middle-East-production-hub/2145675 ↩︎
4. KT&G, Global Ultra-Slim Cigarette ‘Esse’ Surpassed 900 Billion Cigarette Sales ↩︎
5. Activist Fund Claims KT&G to Sue Former and Current Directors ↩︎
6. Exclusive: KT&G faces US Investigation for alleged violations and data manipulation (chosun.com) ↩︎