KT&G Stands Ready for Tough Times

Tobacco and ginseng sales not to have great impact from adverse economic conditions

Korea Tobacco and Ginseng Co. is one of the business firms in the country that knows no slowdown in business, despite the economic crisis sweeping Korea and the world.
Stock market analysts agree that the food sector is rather having better business this year, while other business sectors yarn for good old days and are afraid that the economy is headed for stagnation that visited the country in the last decade.
KT&G officials said in fact that the tobacco industry is not going to be hurt by the slumping economy by much. In fact, they said with the company's exports sharing 20 percent of its total sales, its profit will be expanded, even if the won's value continues to depreciate.
Analyst Song Ki-young of Solomon Securities recommended "buy" for KT&G shares predicting that they are on the upward movement soon with the estimated target price of 103,000 won per share.
The analysts said the food industry would continue to be attractive as the economic slump deepens, recommending their customers to increase their purchase of shares of the companies in the food industry.
Mirae Securities also chimed in saying that KT&G will be able to make profit in any business environment and recommended "buy" for its shares, which they project would hit 103,000 won per share in no time. The securities firm, in fact, put the KT&G shares on top of its list of "buy" shares.
An analyst for the securities firm said the tobacco company's cash flow is always good due to constant demand for its products, along with segregated shareholder policies of the tobacco maker, which justices the premium on its shares. She recommended clients to buy the shares any time they fall.
Hanwha Securities also was no exception as far as its opinion on KT&G was concerned, saying that KT&G can make stable profit at any business conditions. An analyst of the company said food and alcoholic beverages get less impact from the economic downturn.
KT&G shares would emerge as a strong one, especially, next year, when the economy is projected to be the worst since 1998 foreign exchange crisis that hit Korea.
In the meantime, KT&G's sales(1.919 trillion won) during the first three quarters were up 6.9 percent YoY, operating profit(700.8 billion won) up 11.5 percent and net income(648.9 billion won) up 23.3 percent YoY.
The tobacco monopoly recorded the Q3 sales of 230.4 billion won, up 3.7 percent YoY, operating profit during the quarter amounted to 230.4 billion won, down 1.1 percent YoY. And net profit came to 228.8 billion won, up 15.3 percent YoY.
The company's Q3 performance results by sectors shows the sale of tobacco during the first nine months of the year recorded 1.52 trillion won, up 3.7 percent YoY. The Q3 sales came to 535.4 billion won, up 3.3 percent YoY. Tobacco exports during the three quarters of the year amounted to 315.3 billion won, up 11.3 percent YoY.
Korea Ginseng Corp., a subsidiary of KT&G has also done well during the first three quarters of the year with its sales amounting to 464.5 billion won during the three quarters, up 21.2 percent YoY and operating profit in the same period recorded 160.2 billion won, up 25.7 percent YoY. Net profit during the period amounted to 116.4 billion won, up 14.8 percent YoY.
Chairman & CEO Kwak Young-kyoon said we will promote the sale of high-end products and expand our distribution network in key markets with respect to our domestic operations. Turning to overseas, we will extend our distribution channels in China, Taiwan and Japan, and set up a product portfolio optimized for local consumer trends.
With a view to propelling growth of the overall KT&G Group, we will pursue a bold expansion strategy centered on the core businesses. Our objective is to increase value for our shareholders through sustained growth.
Guided by the vision of growing into a leading global enterprise, KT&G will build management systems that satisfy globally recognized standards and secure a foothold in key markets around the world.
KT&G is committed to serving shareholders by ensuring the ultimate in corporate value and continued growth. We look forward to another year of progress for KT&G and all of our stakeholders. nw

Chairman & CEO Kwak Young-kyoon of KT&G.