Kt&G Corp Gdr 144A

I extend my gratitude to all our shareholders and investors for the support and interest you have shown for KT&G. In the first quarter of 2025, KT&G delivered double-digit growth in both revenue and operating profit, mainly driven by the global CC business that reached record high revenue for a quarter. Especially after adjusting for one-off costs, including early retirement packages, Our adjusted operating profit showed exponential growth of 45.1%. Global CC We managed to accelerate the growth trajectory of volume, revenue, and operating profit in the business, a growth that has been sustained for four consecutive quarters. While volumes grew in key markets, aggressive pricing and improved product mix also drove ASP, leading to growth of 23.3% in volume, 53.9% in revenue, and 312.5% in operating profits. Meanwhile, in March, KGC launched a new system of co-CEOs for the domestic and overseas businesses, respectively, to tailor the business structures to market. Under the new system, we will enhance profitability via channel and product reorgs domestically, while fostering localized brands and accelerating key channel expansion overseas. Moreover, as announced by the CEO of JVAG in March, the company is attempting to break away from its stake-centered business to secure future growth momentum from modern products as we engage in diverse business strategies. Through partnerships with industry peers, development of independent products, while seeking opportunities for integrated growth, we will roll out nicotine pouches and e-vapor type products to enforce a multi-category strategy in the near future. If and when we have any updates on this, our CEO will transparently communicate with the market on the topic. We expect 2025 to be a year of extremely high uncertainty and risk. Nevertheless, KT&G will not waver in our efforts for change and innovation as we attempt to secure future growth momentums based on strong core competitiveness to ultimately enhance shareholder and corporate value. I ask for your continued support going forward. Thank you. Before we go into the details of our first quarter results, I have a quick announcement on KT&G's plans for investor relations activities going forward. We intend to strengthen our transparency and consistency in our communications with the market and solidify our relationship based on trust. To that end, we will be expanding IR activities led by the CEO. In line with this, our annual earnings release will be presented by the CEO, where he will update you on the key management activities and earnings highlights, as well as participate in the Q&A session to engage in active and truthful communication with our shareholders and investors. Also, as our CEO has mentioned, key updates on the company's business or strategy, including expanding to modern products for future growth momentum or the KT&G Plus Alpha program, will be directly communicated by the CEO under special announcements. With such efforts, we wish to build trust with the market and strengthen management activities to enhance shareholder value. and I ask for unwavering support from our shareholders and investors. With that, we will move on to our Q1 results in page 4. Q1 consolidated revenue was supported by exponential growth in global CC to rise 15.4% year-on-year to 1.4911 trillion won. Q1 consolidated operating profit was driven by stronger volumes in global CC combined with higher ASB that led to improved profitability, delivering a 20.7% growth to $285.6 billion. In particular, after adjusting for one-off wage-related costs, the adjusted operating profit was up 45.1% to $343.2 billion. As for net income, Currency fluctuations within the quarter led to lower currency-related non-operating profits, driving income down by 9.7% to 257.9 billion won. This led to a 4.7% reduction in EPS to 2,371. EBITDA rose by 19.1% to 354.3 billion won. EBITDA margins at 23.8%. next to page 5 on reasons behind movement in earnings. In the tobacco business, cost variance, including COGS, due to higher volumes and one-off costs had a negative 115.5 billion won impact. But improved product mix with more high ASP products in pricing was a plus 67.2 billion won. Stronger volumes led by Global CC was 66.8 billion won. and appreciation of the dollar against the one added $37.8 billion, surmounting to a total of plus $46.3 billion in profits from the tobacco business. The HFF business had higher SG&A, including advertisement costs, driving down profits by $4.8 billion. The real estate business also added $7.8 billion in profits, supported by higher income recognized from small and medium-sized development products.

All in all,

consolidated operating profits were up 20.7% YOY. After adjusting for one-off rate-related cost of 57.6 million won, adjusted operating profit rose by 45.1%. Moving on to the business segments in page six. First on the tobacco business. Tobacco revenue for the quarter was supported by Global CC that again broke the record on quarter revenues to rise 15.3% to $988.1 billion. Dramatic improvements in global cigarette profitability drove up Q1 operating profit as well as margins. Meanwhile, share of global sales in tobacco for the quarter rose by 3.6 percentage points to 63.1% with strong global CC sales. Let us go into each segment of the tobacco business in page 7. Starting with domestic CC. The domestic CC market volume for Q1 was impacted by higher numbers of cold days and holidays to show a steeper decline than usual of 8%. However, as we launched new products meeting consumer needs to increase our market share, while at the same time duty-free to enhance ASP, The fall in revenue was mitigated. Next to page 8 on global sewers. As mentioned, global CC revenue reached an all-time quarter high as export and subsidiary businesses flourished. Revenue reached an all-time quarter high as well as volume and revenue grew in parallel. And on a YOY basis, we have 53.9% growth. Moving on to Page 9 with NGP. In Q1 NGP revenue, the device supply disruption caused a temporary delay in device procurement, impacting the domestic and global revenue. In turn, NGP revenue was down YOY to 159 billion won. Let's go deeper into domestic and global NGP numbers in Page 10. Domestically, competitors continue to launch new products and engage in aggressive marketing, bringing more attention to the H&B category with market penetration of 1.8% points to 23.2%, accelerating the expansion of the category. Despite such intensified competition and unfavorable environment like the supply disruption, we launched new stick products to maintain market leadership. In the global market, the impact of the supply disruption as well as existing devices becoming outdated, we have observed a delay in new demand creation for overseas states. Next is page 11 with HFF. With the domestic Lunar New Year promotion and high revenue in key global markets, Q1 HFF revenue climbed by 1.9% to 314.4 billion won. In operating profits, While the global business showed continuous improvement in profitability, as we executed marketing investments to revitalize domestic demand for the future, profit for the entire business was down 21% to 18.2 billion won. For global revenue shares, we had stronger sales from overseas. The figure rose by 0.9 percentage points to 21.4%. Breaking down domestic and overseas performance in page 12. Looking at revenue by channel in domestic business, large channels like department stores and supermarkets delivered lower revenue as we restructured operations and product portfolio more towards profitability. However, newly launched brands including KIDARIM and GLPRO grew in sales. and the Lunar New Year holiday gives demand, stroke the growth of standalone channel revenue and fostering of strategic channels via line extensions for online-only products and boosting advertisement efforts led to higher e-biz revenue, adding to a slight increase in domestic revenue. Global revenue was supported by strong Chinese Spring Festival sales and execution of new partnerships in the U.S. to rise by 8.8% to 67.4 billion yuan. Lastly, on page 13 with real estate. For the real estate business, as we recognize more revenue with construction progress in small and mid-sized development projects including Anyang, LIA, and East Daejeon, business revenue grew YOY to 100.4 billion won. Operating profit for the quarter rose for the same reasons to reach 10.4 billion won, higher than the previous year. With that, we conclude our presentation for KT&G 2025 first quarter results. We are now happy to take your questions.