Kt&G Corp Gdr 144A

Today's presentation will be provided in English in simultaneous interpretation and the Q&A session in consecutive interpretation. The materials can be found via the live webcast screen or downloaded from the company website. Please allow me to introduce the KT&G management team in attendance today. With us we have Mr. Sanghak Lee, Chief Finance and Operating Officer, Mr. Changgu He, Chief of Strategy and Planning, Mr. Min Seok Kwon, Chief of Global Business Mr. Young Chan Yoon, Chief of Marketing Mr. Dae Hwa Hong, Chief of NGP Mr. Sang Joon Woo, Chief of Real Estate Business Mr. Yong Beom Kim, Head of Finance Office and Mr. Tae Won Kim, Chief of Future Strategy at KGC Please be advised that the earnings we are about to present today have yet to be audited by the outside auditor, therefore our subjective change in the audit process and any forward-looking information discussed in the call today may differ from the actual results to be reported in the future. We will begin with key items from our consolidated earnings and then move on to each business segment. The presentation will be followed by a Q&A session with the management team. I will first invite Mr. Sanghak Lee, our CFO and COO, to share with you updates on our shareholder returns as resolved by the board of directors today. Please refer to page three. Ladies and gentlemen, I am Sanghak Lee, COO and CFO of KT&G. I would first like to extend my gratitude to our shareholders and investors for your support and interest for KTMG. Today, our board of directors resolved for the execution of the interim dividend for 2025 along with a round of share buyback and cancellation. First of all, for the interim dividend, The board has resolved to reflect the robust growth in our first half performance while maintaining balanced dividend metrics including the payout ratio and the yield by increasing the dividend by 201 to 1,401. The dividend record date will be the 22nd of August and the dividend will be paid out on September 8th. Please refer to our website Going forward, we will consider further capacity to pay out dividends opened up by share buybacks, share price performance, and our profit growth trend to continue to keep our dividends on an upward trajectory. The Board also authorized the share buyback and cancellation of 300 billion won. The company will begin repurchasing shares from the market as of tomorrow and end the process when the total amount of 300 billion won is depleted as per relevant regulations and the shares will be canceled immediately after. This is part of the 1.3 trillion won share buyback program from 2024 to 2027 and completing this round will put us at about 53% progress versus the plan. We will continue to fulfill our mid- to long-term shareholder return plan as announced. Furthermore, regardless to this round of shareholder returns, when we have to proceed from the liquidation of non-core assets in progress, we will use the funds for additional returns. Amid a rapidly changing business environment with increasing uncertainties, KT&G continues to be laser-focused on the core business as well as quality-centered growth with expanded profits. And we will spare no effort in enhancing corporate value while executing top-level shareholder returns. I ask for unwavering support from our shareholders and members of the capital market. Thank you. And now we will move on to the second quarter performance. Please refer to page 4 for the key takeaways. Solid growth continued in the second quarter, allowing our first half revenue to surpass $3.1 trillion for the first time. This was driven by strong growth in global CC and higher real estate earnings. Our global cigarette business broke the record once again for quarter volume and revenue as it sustained the robust growth momentum. Volume grew in key regions including APAC and Latin America and as continued pricing and product mix improvement drove up the ASP, the business saw 9.1% volume growth, 30.6% revenue growth, 51.1%

The HFF business created profit-centered results as per our efforts for structural improvements.

Restructuring the business portfolio towards high-profit channels and products, bringing efficiency behind marketing activities, led to improved profits. As we strive for further profit expansion in the second half, we will aim to achieve double-digit growth in annual operating profits. Sustained growth momentum in Global CC combined with better global cost competitiveness is expected to bring better profitability for the company. I will move on to Q2 consolidated results on page 5. Q2 consolidated revenue was supported by strong growth in Global CC and improved earnings in real estate to rise 8.7% YOY to 1.5479 trillion won. Global CC profit expended to drive up Q2 operating profit by 8.6% to 349.8 billion won. As for net income, currency fluctuations in the quarter led to lower currency-related non-operating profits, driving income down by 54.1% to 143.5 billion won. This led to a 51.1% reduction in EPS, to 1,328. The EBITDA rose by 9.7% to 421 billion won with EBITDA margins at 27.2%. Next to page six on reasons behind the movement of our earnings. In the tobacco business, a high base from the allowance reversal in the previous year was a 95.8 billion won minus in cost variance, but product mix improvement and pricing added 83.6 billion won, volume growth from the global CC business added 10.2 billion won, and appreciation of the dollar against the won was plus 7.4 billion won, surmounting to a total of 5.4 billion won growth in profits from tobacco. The HSS business saw results from optimizing marketing activities adding $7.2 billion to profits, and the real estate business saw higher revenue from development projects, adding $14.8 billion. All these factors combined drove up consolidated OP by 8.6% year-over-year. I would like to move on to earnings from each business segment in page 7. First on the tobacco business, Tobacco revenue for the quarter was driven by Global CC with new quarter revenue records to rise 10.2% to 1.09 trillion won. As profit continues to expand for Global Cigarettes, tobacco operating profit is growing strong as well. However, the high base from the allowance reversal in the last year diluted the operating profit growth for this quarter. and this led to adjusted operating profits still growing in double digits. Share of global business in the quarter continued to grow thanks to expanded coverage and volume in global CC to rise 3.0 percentage points to 62.6%. Let's go to each tobacco segment in page eight. Starting with domestic CC, Domestic cigarette market volume continued to decline in Q2, partially impacting our revenue, while we continued to launch new products catering to consumer needs, sustaining our market share gain. Next to page 9 on global cigarettes. Q2 global CC volumes grew especially in key regions like APAC and Latin America, showing a 9.1% growth to 60.7 billion sticks. Pricing and higher contribution from premium products continue to boost ASP, reaching record volume and revenue at the same time. Moving on to page 10 with NGP. In Q2 NGP revenue, continued to be impacted by the device supply chain issue leading to 196.1 billion won similar to the previous year. Let's go deeper into domestic and global NGP numbers in page 11. Domestically, heightened demand for NGP accelerated the category's market penetration and despite increased competitive activities, including new product launches and aggressive marketing, the consistent growth of Lil Able drove further expansion in our market share. Globally, coverage expansion in Russia enabled a rebound in quarter volumes, demonstrating resilience in a difficult environment. Next to page 12 on HSS. due to HFF revenue was impacted by a business portfolio restructuring towards high profit channels and products, dipping slightly year on year. However, optimizing marketing execution and other profit center strategies took effect, allowing for Q2 operating profit to pick up back to the black. Share of global sales in HFF was reduced due to lower revenue from Greater China. Breaking Down Domestic and Overseas Performance in Page 13 Looking at revenue by channel in the domestic business, online platforms and other high-profit strategic channels grew in revenue by 43%, while the overall market slowdown in HFF and restructuring of low-profit business and products drove down offline revenue. All in all, domestic revenue was reduced year on year. In global revenue, large supermarket channel coverage expansion in the U.S. and Japan and establishment of new products were more than offset by a reduction of inefficient promotions for quality growth, with overall overseas revenue down along with greater China. Lastly, to page 14, earnings from real estate. In real estate revenue, construction progress and development projects, including Anyang, Mia, and East Daejeon, led to higher revenue recognition to 143.7 billion won. Such increase in development project revenue also contributed to higher profits, with Q2 operating profit growing to 17.7 billion won. With that, We conclude our presentation for KT&G 2025 second quarter results. We are now happy to take your questions.