KT&G shifts production overseas under KRW2.4tr CAPEX to cut COGS and boost margins

SEOUL — KT&G is reshaping its production footprint to drive lower costs and wider margins through a rapid shift to global location manufacturing, the company says. The tobacco firm is moving output to new overseas facilities under a KRW 2.4 trillion CAPEX plan, with a Kazakhstan plant now in production and an Indonesian factory scheduled to start in March. Management frames these plants as the centerpiece of a Company‑in‑Company (CIC) structural reform designed to deliver sustained cost‑of‑goods‑sold (COGS) reductions and operational leverage as volumes scale.

The company is prioritising a diversified go‑to‑market model that pairs local manufacturing with expanded original equipment manufacturing (OEM) and licensing agreements to accelerate international rollouts. KT&G expects the new footprint to support double‑digit quantitative and qualitative growth in its global cigarette business by enabling price discipline, lower production costs and more flexible supply to key markets. Executives underline that combining capacity expansion with targeted price increases strengthens margins without sacrificing volume momentum.

Next‑generation products (NGP) form a parallel lever as KT&G seeks to broaden its tobacco portfolio and reduce concentration risk. The company is rolling out new devices and stick formats at home and abroad, aiming to capture incremental market share while using overseas plants to cut unit costs for both combustible and NGP lines. Management signals that the manufacturing shift and product pipeline together are core to its 2026 guidance for continued top‑line expansion and margin improvement.

Annual results underline expansion push

KT&G reports record full‑year revenue of KRW 6.5796 trillion and operating profit of KRW 1.3496 trillion, up 11.4% and 13.5% respectively year‑on‑year. Fourth‑quarter consolidated revenue is KRW 1.7137 trillion with operating profit of KRW 248.8 billion; after a one‑time labour cost of KRW 70 billion, adjusted operating profit rises to KRW 1.4198 trillion, a 19.4% increase.

NGP momentum and 2026 priorities

The global cigarette business posts KRW 1.8775 trillion in revenue, accounting for 54.1% of group cigarette sales, while NGP revenue grows 13.5% to KRW 890.1 billion and stick sales reach 14.78 billion. For 2026 KT&G reiterates focus on COGS reductions, strategic price increases, OEM and licensing expansion and continued NGP rollouts to sustain margin expansion and double‑digit growth.