KT&G's Global Pivot: Overseas Sales Surpass Domestic for First Time

SEOUL, South Korea – February 05, 2026 – KT&G Corporation has marked a pivotal moment in its history, announcing record-breaking 2025 financial results fueled by a historic surge in its international business. For the first time, revenue from the company's global cigarette division has eclipsed its domestic sales, signaling the successful execution of a multi-year strategy to transform the South Korean tobacco giant into a global powerhouse.

The company's full-year consolidated revenue soared to an all-time high of KRW 6.5796 trillion (approximately $4.5 billion), an 11.4% increase year-over-year. Operating profit also saw robust growth, climbing 13.5% to KRW 1.3495 trillion. After accounting for a one-time labor-related cost, the adjusted operating profit reached an even more impressive KRW 1.4198 trillion, a 19.4% jump from the previous year. This strong performance, driven by strategic reforms under CEO Kyung-man Bang, has resonated with investors, pushing KT&G's share price to a new intraday record of KRW 164,000 earlier this week.

A Global Power Shift

The driving force behind KT&G's record year is the remarkable performance of its global cigarette business. The division shattered its own records for revenue, volume, and operating profit, becoming the primary engine of growth for the entire corporation. Global cigarette revenue climbed 14.6% to KRW 1.8775 trillion, accounting for 54.1% of the group's total cigarette revenue. This milestone confirms the company's transition from a domestic-focused entity to one where international markets are the core of its combustible tobacco strategy.

This achievement stands out against the backdrop of a global tobacco market characterized by modest, single-digit growth. While the overall market is projected to expand at a compound annual growth rate (CAGR) of around 2-3%, KT&G's double-digit expansion in both sales volume and average unit prices, driven by strategic price hikes, demonstrates significant market share gains and effective brand positioning in key international territories.

The success reflects a fundamental change in the company's operational model. "By moving away from the former export-based structure and toward a more direct local business structure, the global cigarette revenue has for the first time surpassed that of the domestic business," stated KT&G CFO Sang-Hak Lee. This strategic shift towards localized operations has allowed for greater agility and deeper market penetration.

Building an International Production Engine

Underpinning this global sales triumph is a massive, long-term investment in building a localized manufacturing footprint. KT&G is in the midst of deploying a KRW 2.4 trillion capital expenditure program announced in 2023, designed to create a global manufacturing network that enhances efficiency and reduces reliance on exports from South Korea.

A key component of this strategy, a new factory in Kazakhstan, is already in production with operating rates exceeding 70%. Another major facility in Indonesia is slated to begin operations in March 2026, further bolstering the company's presence in the critical Asia Pacific region, which represents the largest tobacco market globally.

This transition to a "global location manufacturing scheme" is expected to yield significant financial benefits. By producing goods closer to the end consumer, KT&G aims to reduce cost of goods sold (COGS) and streamline its supply chain. This improved cost structure provides the flexibility to implement strategic price increases and more effectively compete in diverse markets. Furthermore, the expanded manufacturing capacity opens the door for new revenue streams, with the company planning to diversify its business models to include Original Equipment Manufacturer (OEM) and licensing agreements.

Beyond Heated Tobacco: The Next Generation Bet

While the traditional cigarette business powers current growth, KT&G is also making aggressive moves to secure its future in a rapidly evolving market. The company's Next Generation Products (NGP) division continued its expansionary trend, with revenue rising 13.5% year-over-year to KRW 890.1 billion on the back of 14.78 billion stick sales.

Significantly, KT&G is broadening its definition of NGP beyond its established heated tobacco products. The company announced a strategic diversification into other alternative nicotine categories, most notably nicotine pouches. This move is anchored by the recent acquisition of 'Another Snus Factory' (ASF), a European manufacturer. The plan is to leverage the combined capabilities of both firms to expand into the fast-growing nicotine pouch and modern vapor product segments.

This diversification is a calculated response to shifting consumer preferences and a complex global regulatory landscape. As smokers increasingly seek alternatives to combustible cigarettes, the market for products like nicotine pouches has seen explosive growth. The category's validation in major markets, such as the U.S. Food and Drug Administration's authorization of some pouch products as being less harmful than cigarettes, has created a significant commercial opportunity that KT&G is now positioned to capture. This expansion allows the company to hedge against future regulatory pressures on combustible and heated tobacco while tapping into new avenues for growth.

Balancing Growth with Shareholder Rewards

Despite the heavy capital investments in global manufacturing and NGP diversification, KT&G remains firmly committed to delivering robust returns to its shareholders. The company has set a 2026 guidance targeting revenue growth of 3-5% and operating profit growth of 6-8%, reflecting a continued focus on profitability.

Alongside this growth forecast, KT&G reaffirmed its shareholder return policy, which is among the most generous in the industry. The company plans to maintain a total shareholder return of 100% or higher, a commitment it met in 2025 with a total return of 109.8%. This will be achieved through a combination of a sustainable dividend payout ratio of 50% or more and a policy of flexibly repurchasing shares when they are deemed undervalued.

For 2025, the company announced a dividend per share of KRW 6,000, an 11.1% increase from the prior year. This strategy of balancing ambitious, long-term growth initiatives with substantial and consistent investor rewards has solidified its reputation as an attractive investment within the global tobacco sector, promising both stability and a stake in its ongoing global transformation.