KT&G Shrugs off Call for IPO
of Korea Ginseng Corp.

Chairman Kwak says its rejection of suggestions by the Carl Ichan side
KT&G Chairman-CEO Kwak Young-kyoon has officially denied any plan to go public with its subsidiary Korea Ginseng Corp. and dispose of its real estate holdings.
CEO Kwak made it clear at an investor relation session held on January 25 at the Korea Exchange that KT&G cannot accept suggestions by the Carl Icahn side. KT&G Chairman Kwak said he met two reps of the New York billionaire Carl Icahn's group late last year and turned down their suggestion about the initial public offering (IPO) of Korea Ginseng Corp., disposal of real estate and retirement of treasury stock. Carl Icahn is believed to have a less than 5 percent interest in the Korean tobacco company.
However, he said, "KT&G's decision on the same day to retire common shares repurchased by the company was made in accordance with what KT&G has earlier agreed to make good on."Chairman Kwak said, "Operating profit for last year plunged 33.7 percent over the previous year, but that showed signs of rising to previous levels from the fourth quarter of last year and this year's prospects are bright."He noted that KT&G plans to purchase 3 million shares and retire them as part of its efforts to enhance the value of shareholders. The cigarette company decided to pay 1,700 won in 2005 dividend, 100 won more than the previous year's. KT&G share prices once climbed up about 4 percent on the day before closing at 45,900 won, a 0.43 percent drop from the previous day.
DECLINING SALES BUT RISING NET INCOME ― KT&G announced on January 25 that the company chalked up 2,209.3 billion won in sales during 2005 and 676.9 billion won in operating income, representing a 16.7 percent and a 33.7 percent plunge, respectively, over the previous year. Industrial analysts say sluggish cigarette sales in 2005 were attributable to a surge in speculative demand that occurred prior to cigarette price hikes in 2004. Analyzing sales volume by business areas, KT&G said the cigarette production sector witnessed a 20.3 percent plunge, presenting a striking contrast to the housing distribution filed that saw a 93.7 percent jump.
Profits once declined. The ratio of gross sales to net sales fell to 55.4 percent in 2005, 2.9 percentage points lower than a year earlier, and the ratio of sales to operating income declined 7.9 percentage points from 2004 to 30.5 percent in 2005.
However, net income increased to 515.9 billion won last year, up 9.2 percent from 2004. Chairman Kwak said a rise in net income was attributable to a plunge in corporate bond redemption loss and corporate income penalty taxes.
KT&G saw its market share edging up from 70.1 percent in the first quarter of 2005 to 74.4 percent to the second quarter, but declining a little to 72.6 percent in the fourth quarter.
KT&G aims to raise sales 6.3 percent to 2,348 billion won during this year and operating income to 731.2 billion won, up 8 percent over 2004.
BOOSTING VALUE of SHAREHOLDERS ― KT&G plans to expand dividends while seeking to promote the cancellations of common shares held by the company in a bid to boost share prices. The dividend per share increased from 1,400 won in 2002 to 1,700 won in 2005. The company cancelled 3 million shares in 2003, 13 million shares in 2004 and 3 million shares in 2005. KT&G has already announced a plan to retire 3 million shares in 2006 for the fourth consecutive year.
Some foreign investors have reportedly demanded additional steps to boost the value of shareholders. Concerning the demand for the IPO of Korea Ginseng Corp., he said his company plans to go public with the subsidiary after boosting sales and profits through restructuring.
Regarding the issue of disposing of real estate, Chairman Kwak said his company has massive real estate holdings in Suwon, Daegu, Jeonju, Jeonju and Cheongju, but it will take time in implementing such real estate development projects because it is negotiating with regional autonomous governments and environment organizations for a long time. nw