KT&G's contents are good, so I'm giving you a

KT&G's contents are good, so I'm giving you a quick update first. We announced an additional KRW 150 billion in treasury stock purchase and immediate retirement this year. We raised funds through the efficiency of non-core assets~!
The performance is very good. It seems that the good trend will continue until the end of the year. I think that when the new overseas NGP platform is released next year, the growth rate of NGP will also increase.

⚡️KT&G 3Q24 Re

Revenue of KRW 1.6363 trillion (YoY -3.1%)
Operating income of KRW 415.7 billion (YoY 2.2%)
Net income of KRW 239.6 billion (YoY -23.6%)

<Cigarette>
Sales) KRW 1.478 trillion yy 7.7%
Young-ik) 333 billion won yy 23.6%
60.4% of global share (yy +2.5%p) (Good sales of overseas convention)

Domestic convention: despite sales yy -3.8%, duty-free yy 7.6%, and reduced market aggregate demand (-5.6%), M/S expansion was good
★Overseas convention: Sales yy 30.5%, quantity yy 10.1%
>Export: Increase in exports to Asia-Pacific and new markets and increase prices / Corporation: Indonesia-centered quantity/price increase effect

Domestic NGP: Sales yy 15%, stick share yy +1.8%p, M/S expansion due to launch of new stick products
Overseas NGP: Revenue yy -38% Adjusted Intentional Device Inventory Ahead Of New Platform Launch Next Year, Profitability Improvement

<Dry food>
Sales) KRW 405.8 billion yy -1.7%
Young-ik) 68.8 billion won yy 13.3%

Domestic Demand for Chuseok Gift Sets Decreased and Large Special Sale Channel Adjustment Impact
Overseas growth of major countries such as China and Japan

<Real estate>
Sales) KRW 98.5 billion yy -56%
Youngik) 12.7 billion won yy -83.4%

★Main contents of the announcement of the new value-up
1. A total of 3.7 trillion won in shareholder returns for four years (2024-2027) (dividend of 2.4 trillion won + treasury stock of 1.3 trillion won)
2. KT&G Plus Alpha Program
> Additional shareholder return plan when non-core asset efficiency funds flow in
>We plan to accumulate 1 trillion won in asset efficiency over the next 4 years. We will review the purchase and retirement of treasury stocks first when cash flows in
3. Total treasury stock retirement scale (~27) approximately 20%+ (based on total number of shares issued in 2023)

★ CAPEX Investment Expenditure -31% KRW 2.4 trillion compared to the previous plan
>Existing CAPA is the same. Strengthen PMI partnerships and increase production through OEMs

★2024 Plus Alpha Program
>An additional KRW 150 billion will be returned to shareholders by the end of this year
> Repurchase and immediate retirement of additional 1.35 million shares

Key QnA
Q. Overseas Korean Federation) Factors that boost performance by major countries and outlook for the fourth quarter/next year
Factors in strong performance >
The quantity increases exports to Asia-Pacific and new markets and sales of overseas corporations such as Inni Corporation
Sales: Sales volume/price/product mix/currency synergy
Profit: YoY up 167% due to improved cost and SG&A ratio due to higher quantity/ASP

Prospects >
Aggressive seeding accelerated by actively expanding overseas direct business, revitalizing existing areas, and expanding new areas
Strategies to strengthen profitability by adjusting the unit price of differentiation by market
Growth Trends For Q3 FY24 Will Continue Through Year's End
To achieve double-digit annual growth in guidance volume

Q. Tobacco) Price trends and prospects for raw materials in the future
Current Status> The price of leaf cigarettes rose 15.6% year-on-year in 24
However, due to the reduction of processing costs per unit and cost reduction, the manufacturing cost of sticks is reduced

Outlook> Slowing Leaf Tobacco Growth. Cost Burden Eases In Short Term
Continuing to improve profitability through cost reduction, expansion of high-profit sales, and promotion of cost reduction projects

Q. Estimated CAPEX Amount Decreased compared to the previous one
It is expected to remain at the level of pre-production CAPA announcement due to expansion of PMI partnerships and use of OEM companies
The expected return on five-year investment is expected to achieve the existing level sufficiently
Reduced external production partner depreciation cost burden gives profitability management advantages
Dry-type capax reduction in part

Q. Value-Up) Reasons for prioritizing share buyback and retirement in the Plus Alpha program
Share buybacks and incineration are ways in which the value per share directly increases and directly affects the stock price
The expected rate of return is higher than the dividend rate. In the future, the purchase and retirement of additional shareholder returns are prioritized, but the decision is made in consideration of the total shareholder return rate
In addition to additional shareholder returns, growth investments will also be considered

Q. NGP Overseas) Reasons for stagnant stick growth and business outlook / Potential for entering the U.S
Sticking Growth Slowdown Factors >
80% of Lil Solid's total market enters 34 countries
Stagnation of Stick Growth As We Review New Platform Launch, Stick Volume Decreases Due to Device Inventory Adjustment
Sales Normalize and Expect Further Growth When New Platforms Are Launched Next Year

Enters the U.S. >
It can be released only after FDA PMTA approval, but the approval process takes three years after application
We are preparing by signing a joint PMI preparation MOU to obtain FDA PMTA approval