KT&G saw positive growth for both its combustible and heat-not-burn products.
KT&G Corporation, South Korea's leading tobacco manufacturer, announced its financial results for the first quarter of 2023.
The first quarter consolidated revenue decreased 0.5% YoY to KRW1.396 trillion and consolidated operating profit decreased 5% YoY to KRW316.5 billion. The slight decrease in operating profit was mainly driven by cost of goods sold (COGS) inflation, mix, and increase in costs.
Despite such headwinds, KT&G delivered continued robust growth in its main business, consisting of combustibles and heat-not-burn (HNB), which proves the company's fundamentals remain intact. It is also worth noting that the company's first quarter overseas sales volume accounted for more than 58% of its total sales volume, showing that the company is on track to become a 'global top-tier' company.
For combustibles, KT&G sold 9.48 billion sticks in the domestic market and 13.37 billion sticks in the overseas market in the first quarter. The overseas combustibles category saw remarkable growth in both sales volume and revenue compared to the same period last year.
As mentioned above, KT&G's overseas combustibles category recorded a sales volume of 13.37 billion sticks, which represents 16.1% growth YoY. The revenue increased 17.1% to KRW265.1 billion . Such significant growth in the overseas combustibles category was led by strong performance by overseas subsidiaries, which saw a 60% increase in sales volume and 44.3% increase in revenue compared to the same period last year. The company's Indonesian subsidiary played a huge role as it accounted for 24% of total overseas combustibles sales volume in the first quarter. KT&G's Indonesian subsidiary reported sales volume of 3.21 billion sticks, representing 40.8% growth YoY.
Total HNB sales volume that includes both domestic and overseas figures increased 41.9% compared to the same period last year to 3.22 billion sticks, fueled by robust growth in both domestic and overseas markets. In the domestic market, KT&G's market share hit an all-time high of 48.4% buoyed by the company's successful launch of the new HNB platform, lil AIBLE , and the rapid growth of the market. Out of the total 3.22 billion sticks, overseas sales volume accounted for almost 58%. KT&G sold 1.84 billion sticks of HNB consumables in the overseas market, representing 64.3% growth YoY.
Earlier this year, the company unveiled the 2027 KT&G Vision and outlined its growth strategies that focus on three core business areas, which include HNB, health functional food, and overseas business. As the company has continuously strived to foster growth in these core business areas, the sum of their revenues for the first quarter accounted for more than 60% of the company's total revenue, and their operating profit saw 14% growth YoY. The company plans to strengthen its commitment to leap forward as a 'global top-tier' company and accelerate the global expansion of its core businesses.