Kt&G Corp Gdr 144A

Ladies and gentlemen, I am Erin Lee, Head of Investor Relations at KT&G. Thank you for joining us for KT&G's 2026 Third Quarter Earnings Release and Capital Markets Day. Please allow me to share with you today's agenda. We will first announce our third quarter earnings, and then our CEO, Mr. Kyungman Pang, will share with you KT&G's mid- to long-term growth strategies and shareholder return plans. It will be followed by a fireside chat on today's presentation. This event will be held in Korean and English simultaneous interpretation will be provided. You can also download all materials on the KT&G website. With that, we will now begin with the 2026 third quarter earnings release.

Please be advised that the results we are presenting today have yet to be audited by our external auditors and may be subject to change during the audit process. The presentation also includes forward-looking information based on our current expectations. Actual future results may differ from these expectations. Now, our CFO and COO, Mr. Sanghak Lee, will present the key highlights of our 2026 third quarter results. Ladies and gentlemen, I am Sanghak Lee, CFO and COO of KT&G. Thank you for joining KT&G's 2026 Third Quarter Earnings presentation. Let me begin with the key highlights for the quarter. KT&G maintained solid growth in the third quarter, achieving new quarterly records in both revenue and operating profit. Consolidated revenue increased 4.3% year-on-year, to 1,905.2 billion won. Operating profit rose 13.9% to 530.1 billion won, exceeding 500 billion won in a single quarter for the first time. In the tobacco business, growth in CC and NGP, together with improved costs, drove both revenue and operating profit to new quarterly records. The operating profit margin reached 32.6%. International CC delivered growth in volume, revenue, and operating profit for the 10th consecutive quarter, with volume and revenue reaching new quarterly records. Volume increased 6.2% year-on-year, revenue rose 10.5%, An operating profit grew 21.9%, significantly improving profitability. In Korea and GP, STIC volume increased 6.8% and our market share reached 49.1%. A greater share of high ASP STICs reported continued growth in the quality of our earnings. On September 15, we launched Little Tonino Lamborghini featuring a preheating time of just 3 seconds and we will further strengthen our market leadership by expanding sales nationwide in November. International NGP also delivered growth in volume, revenue, and operating profit with strong performance in key markets. Finally, in the health function of food business, revenue and operating profit increased 3.4% and 12.2% year-on-year, respectively. In Korea, both premium and value brands posted strong sales. Internationally, revenue growth in Greater China and cost efficiencies improved profitability. In the U.S., we are continuing our pilot test for energy drinks with Altria Group, And for the ingredients B2B business, we are pursuing strategic partnerships with global F&B and beauty companies. Uncertainty in the external business environment, including exchange rates, continues into the fourth quarter. We will focus on growing our core businesses and improving profitability, making every effort to achieve our full year guidance. We look forward to the continued interest and support of our shareholders and the members of the capital market. Thank you. I will now take you through our 2026 third quarter results in more detail. Please turn to page four. In the third quarter, growth in our tobacco business drove consolidated revenue and operating profit to new quarterly records. Consolidated revenue increased 4.3% year-on-year to 1,905.2 billion won. Operating profit rose 13.9% to 530.1 billion won, reflecting continued profitability-led growth. Net income decreased 75.1% year-on-year to 104.1 billion won. This mainly reflected lower valuation gains on foreign currency assets due to the differences in exchange rate movements during the quarter. Earnings per share were 1,020 to 1. EBITDA increased 12.2% year-on-year to $606.2 billion, with an EBITDA margin of 31.8%. Next, let us look at the key drivers of the change in consolidated operating profit on page 5. Let me begin with the tobacco business. An improved product mix and pricing contributed $23.7 billion to operating profit. Higher international CC and NGP stick volumes added $12.8 billion. Cost improvements, including COGS, contributed $9.7 billion, while foreign exchange movements added $7.5 billion. Together, these factors increased operating profit in the tobacco business by $53.7 billion. Operating profit also increased by 8.7 billion won in health functional food and 4.1 billion won in real estate. As a result, consolidated operating profit increased 13.9% year-on-year to 530.1 billion won. I will now discuss the results by business in more detail. Please turn to page 6. First, the tobacco business. Supported by growth in both CC and NGP, revenue increased 6% year-on-year to $1,306.5 billion, exceeding $1.3 trillion in quarterly revenue for the first time. Operating profit also reached a new quarterly record, rising 14.4% year-on-year on revenue growth and improved costs. The operating profit margin increased The share of international sales by volume increased to 64.8%, driven primarily by growth in international CC volume. Let me now take you through each part of the tobacco business, starting on page 7. First, international CC. International CC maintained its triple growth in volume, revenue, and operating profit in the third quarter. Volume increased 6.2% year-on-year to 19.57 billion sticks, while revenue rose 10.5% to 579 billion won. Both volume and revenue reached new quarterly records. In particular, revenue growth and cost improvements drove operating profit growth that outpaced revenue growth. Next, please turn to page 8 for Korea SEC results. Total Korea CC market volume decreased 5.4% in the third quarter, reflecting a high base from demand brought forward ahead of the Chuseok holiday in the same quarter last year. We limited the decline in revenue by increasing our market share and the contribution from high ASP duty-free channels. Our volume decreased 5.3% year-on-year to 10.12 billion sticks, while revenue declined 3.8% to 429.7 billion won. Next, please turn to page 9 for NGP results. In Korea NGP, stick volume increased 6.8% year-on-year. A greater share of high ASP sticks for Lil Abel improved the product mix and supported Continued profitability-led growth. International NGP delivered growth in volume, revenue, and operating profit, supported by strong sales in key markets. I'll now discuss their Korea and international NGP results in more detail. Please turn to page 10. In Korea, HMB market penetration increased Wild growth in stick volume led by Lil Abel helped us achieve a market share of 49.1%. Internationally, volume continued to grow moderately as new stick and device launches supported sales in key markets, including Russia. Next, please turn to page 11 for the health functional food business. In the third quarter, revenue in the health functional food business increased 3.4% year-on-year to $372.2 billion. This was driven by strong sales of premium and value brands responding to changing consumer trends. Operating profit increased 12.2% year-on-year to $80.1 billion as profitability improved across all international regions. Moving on to the domestic and international results respectively, please turn to page 12. In Korea, stronger demand for our brands drove growth, particularly in department stores, duty-free stores, and online channels. Revenue increased 3.9% year-on-year to 316.7 billion won. International revenue rose 0.7% year-on-year to 55.5 billion won. Supported by growth in Greater China, including China and Taiwan. Next, please turn to page 13 for the real estate business. Revenue in the real estate business decreased 13.3% year-on-year to $126.7 billion. As small and medium-sized development projects approached completion, the amount of revenue recognized based on the percentage of completion declined. Operating profit increased 19.8% year-on-year to $24.8 billion as the completion of the MIA and East Dejan Development Project's reduced costs and SG&A expenses. This concludes our 2026 third quarter earnings presentation. We will begin the KT&G 2026 Capital Markets Day shortly.

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