KT&G Joins the '6 Trillion Won Club'... Overseas Conventional Cigarettes and Domestic NGP Drive Dual Growth

KT&G Expected to Surpass 6 Trillion Won in Annual Sales for the First Time
Strong Growth in Overseas Conventional Cigarettes and Electronic Cigarettes Drives Expansion
Shareholder Returns and Nicotine Pouches Set Stage for Structural Revaluation

KT&G's NGP (Heated Tobacco Product) device 'Lil Able 2.0 Plus'.

KT&G's annual sales last year are expected to surpass 6 trillion won for the first time in its history. While the domestic cigarette market has entered a mature phase with overall demand continuing to decline, KT&G is accelerating its transformation from a traditional tobacco company into a global nicotine platform enterprise. This is being driven by rapid growth in overseas tobacco operations, a recovery in next-generation products (NGP), expansion into new businesses such as nicotine pouches, and an unprecedented shareholder return policy, all being pushed forward simultaneously. This growth momentum is expected to continue this year, making the ‘6 trillion won in sales’ not a one-off event, but the starting point of structural growth.

Overseas Tobacco: ‘Qualitative Growth’ Strategy Changed the Game... Electronic Cigarettes Move Beyond Recovery to a Growth Path

According to market research firm FnGuide on January 9, KT&G’s consolidated sales last year are projected at 6.4706 trillion won, with operating profit at 1.3434 trillion won. These figures represent increases of 9.5% and 13.0%, respectively, compared to the previous year.

The core driver of KT&G’s improved performance last year was its overseas cigarette business. In the past, the company relied on promotional discounts and low-price strategies to expand volume, but it has recently shifted its strategy by reducing discounts and increasing the proportion of high-margin products. Through this approach, a structure of qualitative growth has taken root, with both ASP (average selling price) and sales volume rising simultaneously.

In particular, growth accelerated in the Commonwealth of Independent States (CIS), Middle East, and Southeast Asia, as local production expanded and distribution networks stabilized. The impact of the expanded Kazakhstan plant has been fully reflected since last year, and a new factory in Indonesia is scheduled to begin operations this year. The expansion of overseas production bases is directly improving profitability by reducing logistics costs and generating favorable currency effects.

The market expects KT&G’s overseas cigarette sales growth rate to exceed 30% this year, with growth of around 20% anticipated for next year as well. This explains why KT&G’s total tobacco sales are increasing, even as overall domestic cigarette demand declines.

KT&G 'Esse Noir'

NGP (Heated Tobacco Products) has also become a pillar of structural growth. Until 2024, growth was hampered by supply disruptions of devices in Vietnam and sluggish sales of Philip Morris sticks, but since last year, most of these issues have been resolved and sales have normalized.

In Korea, KT&G’s premium device lineup, including ‘Lil Hybrid’ and ‘Able,’ has gained traction, and internationally, the company is preparing to enter new markets such as Russia and launch new global platforms. The securities industry expects KT&G’s global NGP sales contribution to rise to a new level by 2026.

Nicotine Pouches: A Bold Move Targeting the ‘Post-Tobacco’ Era

KT&G’s strong performance is expected to continue this year. According to FnGuide, KT&G’s sales in 2026 are projected to reach 6.7743 trillion won, with operating profit expanding to 1.4648 trillion won. This growth is anticipated to be driven by the high growth of overseas cigarettes and NGP, the next-generation nicotine portfolio of nicotine pouches, and shareholder returns totaling 3 trillion won, all operating in tandem.

Bang Kyungman, President of KT&G, and Billy Gifford, CEO of Altria, signed a comprehensive memorandum of understanding in September last year to establish a strategic partnership in the global nicotine and non-nicotine market, and are taking a commemorative photo.
[Photo by KT&G]

First, in September last year, KT&G partnered with Altria to jointly acquire ASF (Another Snus Factory Stockholm AB), a Swedish nicotine pouch company. This marked KT&G’s full-scale entry into the rapidly growing nicotine pouch market, particularly in Northern Europe.

ASF owns the ‘LOOP’ brand, which holds the top market share in Iceland and ranks second or third in Sweden and Norway. Starting from the first quarter of this year, ASF’s performance will be reflected in KT&G’s equity-method earnings. KT&G plans to leverage its established distribution networks in the Middle East and Asia-Pacific, where it already has strengths, to expand the reach of nicotine pouch products.

This essentially extends the strategy KT&G used to quickly establish itself in the overseas electronic cigarette market through a global NGP partnership with Philip Morris International (PMI), now applied to nicotine pouches. The market is paying close attention to the potential for nicotine pouches to become the next-generation nicotine product following electronic cigarettes.

Shareholder Returns: Overturning KT&G’s ‘Conservative’ Image

Another major change at KT&G is the full-scale implementation of its shareholder return policy. The company has already announced a shareholder return plan totaling 3.7 trillion won for the period 2024-2027. This aggressive plan includes 1.3 trillion won in share buybacks, 2.4 trillion won in dividends, and the cancellation of treasury shares.

Additionally, KT&G has opened up the possibility of further returns through the sale of non-core real estate and financial assets, completely transforming its image as a company that simply accumulates cash. With overseas plant expansions entering their final stages, annual capital expenditures (CAPEX) are expected to decrease to around 200 billion won from this year onward, directly providing resources for increased dividends and share buybacks. The securities industry sees a high possibility that the combination of KT&G’s cash generation capability and its return policy will trigger a full-fledged revaluation of the company’s valuation.

Another positive factor for KT&G’s mid- to long-term growth is the potential for a tobacco tax increase. The last tobacco tax hike occurred in January 2015, and there has been no change in the tax rate for over 10 years. This is why there is speculation about a possible increase around 2026.

Past cases show that while demand temporarily contracted in the short term, in the mid- to long-term, the price increase effect led to improved margins and had a positive impact on the stock price. If a tobacco tax hike is implemented, it could once again become a catalyst for strengthening KT&G’s earnings and stock momentum.

KT&G Headquarters Building Exterior.