KT&G expands overseas manufacturing to lower COGS, scale NGPs and grow margins

KT&G shifts production overseas to cut costs and scale new products

KT&G is accelerating a strategic shift to global location manufacturing to lower production costs and expand next‑generation product (NGP) offerings, saying new plants will underpin margin gains and volume growth. The company is executing a KRW 2.4 trillion CAPEX plan announced in 2023: its Kazakhstan facility is now in production and an Indonesian factory is slated to start in March, enabling lower cost of goods sold and greater operational leverage. Management frames the move as part of a broader profitability push under CEO Kyung‑man Bang and the firm’s Company‑in‑Company (CIC) structural reforms.

The overseas plants are intended to support both traditional cigarette scale and a wider NGP portfolio through OEM and licensing channels, the company says. KT&G reports that the global cigarette business is already delivering record results, with revenue of KRW 1.8775 trillion, up 14.6% year‑on‑year and accounting for 54.1% of group cigarette revenue for the first time. Concurrently, NGP revenue rises 13.5% to KRW 890.1 billion, while stick sales increase 2% to 14.78 billion sticks, driven by new devices and stick launches at home and abroad.

KT&G’s guidance for 2026 focuses on converting to the global manufacturing model, targeted COGS reductions, strategic price increases and further NGP rollouts. Management expects the combined effect of lower production costs from Kazakhstan and Indonesia, price discipline and diversification into OEM and licensing to sustain double‑digit top‑line growth and broaden margins into 2026, reinforcing the company’s stated aim of qualitative as well as quantitative expansion.

Financial performance supports expansion plans

KT&G posts record full‑year revenue of KRW 6.5796 trillion and operating profit of KRW 1.3496 trillion, with adjusted operating profit of KRW 1.4198 trillion after excluding a one‑time labour cost of KRW 70 billion. Quarterly results remain strong, reflecting the operational momentum the company says will be amplified by its global manufacturing and pricing strategies.

NGP rollouts and commercial strategy

KT&G highlights that NGP growth is propelled by product introductions both domestically and internationally and by plans to diversify channels such as OEM and licensing. The company positions NGP expansion as a core part of its strategy to strengthen the tobacco business while pursuing margin expansion through scale and price management.