Kt&G Corp Gdr 144A

Ladies and gentlemen, thank you for attending today. We will now begin the conference call for KT&G's 2026 first quarter earnings report. After the presentation from KT&G, there will be a Q&A session with the participants to the call. If you wish to participate with a question, please press star and the number one. And we will now begin with KT&G's presentation. Ladies and gentlemen, I'm Aaron Lee, head of investor relations at KT&G. Thank you for attending KT&G's 2026 first quarter results. 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 management team in attendance today. With us we have Mr. Sanghak Lee, Chief Finance and Operating Officer, Mr. Young Chan Yoon, Chief Strategy Officer, Mr. Chang Ku Ho, Chief Marketing Officer, Mr. Min Seok Kwon, Chief of Global Business, Mr. Dongpil Kim, Chief of NGP, Mr. Sangjun Woo, Chief of Real Estate Business, Mr. Yongbeom Kim, Head of Finance Office, and Mr. Seungkyu Han, 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 are subject to 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. With that, we will begin the 2026 first quarter earnings report. Today's presentation consists of key items from our consolidated results and earnings for each business segment. After the presentation, we will proceed to Q&A with the management team in attendance. Please allow me to invite Mr. Sanghak Lee, our COO CFO, to share with you highlights of the 2026 first quarter earnings and some business updates. Ladies and gentlemen, I'm Sanghak Lee, CFO and CEO of KT&G. Thank you for joining us at our 2026 first quarter earnings release. Please allow me to brief you on our key achievements in the first quarter of 2026. Our global cigarette business recorded highest ever quarter revenue with a growth trifecta of volume, revenue, and operating profit. ASP increased combined with volume growth, drove volumes up 15%, revenue 24.6%, and operating profit 56.1%. Amid tensions in the Middle East, we have secured safety stocks by promptly discovering alternative routes, and offtake sales are showing strong numbers still. All regions including APAC, Eurasia, and new markets have shown stable sales growth, allowing us to project our overseas CC business growth to continue throughout the entire year. In NGP, the domestic and overseas earnings grew in tandem. In Korea, we reached 47.4% in stick market share to solidify our leadership position in the market. Little Able 3.0 that was launched in online channels in April is well received in the market, acknowledged for our product capabilities. Going further, we are preparing to launch new products every quarter of this year to strengthen our firm dominance in the NGP market. Internationally, strong sales in big markets and favorable comparison against last year thanks to a normalized device supply chain drove significant increase in revenue. And we will sequentially expand our direct NGP business starting with key markets in APAC and Eurasia. Our HFF business grew in both revenue and operating profits. profit-centered structural transformation along with strong results from the Lunar New Year promotion drove revenue up by 5.8% and operating profit by 53.3%. AT&G intends to foster a global nutrition business at group level based on our competitiveness on red ginseng. As the global SMB and health supplement market today is rapidly transitioning to functional materials and science-based solutions, we aim to diversify our business model from simply B2C to add B2B on materials. Through collaboration with Altria, starting from May, we will launch energy drink products for US consumers and we will also pursue additional partnerships with other parties. And under resolution by the newly formed Board of Directors after our AGM, we have completed the full cancellation of our treasuring shares worth approximately $1.8 trillion won. With it, We have exceeded the target for cancellation as announced in November 2024 via the Corporate Value of Plan for 2024-27 ahead of schedule, canceling total 22.4% of issued shares across the three years. Based on robust business growth and profitability, KT&G will continue its earnings-based shareholder returns And in the second half of this year, we plan to announce a new mid to long-term shareholder return policy that focuses on stronger dividends. I ask for your unwavering support and interest for KT&G going forward. Thank you. And now we will move on to details of our 2026 Q1 earnings in page two. Q1 consolidated revenue was supported by a strong tobacco business, rising 14.3% year-on-year to $1.7036 trillion. Operating profit grew across all segments of tobacco, health, functional food, and real estate to rise 27.6% to $364.5 billion. Net income was lifted by higher operating profit and currency-related non-operating profits, rising 46.6%, to 378.2 billion won. EPS grew by 54.7% to 3,666 won. EBITDA rose by 25% to 442.7 billion won with EBITDA margins at 26%. Next, two factors behind movement in earnings in page three. Starting with the tobacco business. Despite an increased cost of 15.6 billion won linked to higher volumes, improved product mix and pricing added 21.1 billion won. Volume growth in overseas CC and NGP was 58.8 billion won. Dollar appreciation against the won was 4.4 billion won increment, totaling to 68.7 billion won increase in profit for the tobacco business. HFF and real estate also saw increase in profit by 9.7 billion won and 3.6 billion won respectively. All in all, consolidated operating profit rose by 27.6% to 364.5 billion won. Let's move on to the results for each business segment in page four. First on to the tobacco business. Tobacco business revenue was supported by overseas cigarettes that recorded highest ever quarter revenue as well as strong results across the NGP business to rise 17% YY to 1.1559 trillion won. Operating profit grew across domestic and overseas CC and NGP growing by 27.2% with operating margins growing 2.2 percentage points. The share of global sales in tobacco grew by 3.7 percentage points as the international cigarette business showed robust earnings, continuing our global business expansion. Breaking down the tobacco business into segments in page nine. Beginning with domestic CC. Quarter domestic CC market volume saw natural decline and transfer of demand to NGP declining by 5.2% year over year. However, with new product launches catering to consumer needs, we continued our market share growth trend with market share rising 0.4 percentage points, reaching 68.8%. Moving on to page six for global CC. Global cigarette revenue grew by 24.6% YOY to reach record high quarter revenue, proving the sustainability of our global growth. Volumes grew across all regions of Eurasia, APAC and new markets, rising by 15% to 18.01 billion sticks. While strong ASP increase continued, improvements in cost and SG&A efficiency added to once again drive up the profit significantly. Next to NGP in page 7. NGP grew in both revenue and operating profit thanks to growth in the domestic and international businesses. Internationally, strong device and stick sales in key markets, including Russia, combined with a favorable comparison against last year that suffered a supply chain disruption on the device, led to growth in all stick volume, revenue, and operating profits. Next, on details of the domestic and international NGP business in page four, or page eight. Domestically, penetration of the HMB category reached 25%, expanding its presence, and with the growth of our low-able devices six, KT&G market share reached 47.4%, solidifying our leadership positions. Internationally, expanded distribution coverage in Russia and new product launches drove volume growth. Next is page 9 to HFF. Strong results from the Lunar New Year promotion in Korea and the boost from the Cheonrok brand campaign drove HFF revenue by 5.8%. In operating profit, higher revenue from high profit channels including online and profit center strategy including efficiency marketing execution led to profit growth of 53.3%. share of global sales was reduced as domestic revenue grew. Going into specifics of the domestic and overseas performance in page 10. In domestic revenue by channel, inflow of consumers via the Lunar New Year promotion and brand campaigns were mainly in high profit online channels, supporting the revenue and operating profit growth. Internationally, while revenue in China grew with the Lunar New Year promotion, U.S. revenue decline drove down overall international revenue. Lastly, on page 11 for real estate. As construction rates progressed in development projects for Anyang, Mia, and East Daejeon, real estate revenue for the quarter rose by 16.4%. Operating profit grew as well by 34.6% with higher development project revenue. This concludes the KT&G 2026 first quarter earnings release. We'll now proceed to Q&A.

Now Q&A session will begin. Please press star 1. That is star and 1 if you have any questions.

Questions will be taken according to the order you have pressed the number star 1. For cancellation, please press star 2. That is star and 2 on your phone.