KT&G’s Q3 OP Down 14.8% On Yr Due To Sluggish Cigarette Sales

Source from:  Pulse News 10/31/2018

South Korea’s tobacco maker KT&G Corp. on Tuesday reported a 14.8 percent on-year decline in its operating profit in the third quarter due to weak cigarette sales at home and abroad.

KT&G said in a regulatory filing on Tuesday that it posted 359.3 billion won ($315.3 million) in operating income on a consolidated basis for the third quarter ended September, down 14.8 percent from a year ago. Sales also dropped 7.6 percent to 1.18 trillion won and net profit 15.8 percent to 259.3 billion won over the same period.

KT&G’s third-quarter earnings also missed analysts’ estimates. The consensus for sales was 1.27 trillion won and operating income 379.4 billion won.

Poor third quarter results were mainly due to sluggish cigarette sales at home and abroad, according to the company.

KT&G sold 11 billion cigarettes in the July-September period in Korea, down 10.6 percent from 12.3 billion cigarettes last year. The company’s overseas cigarette sales also declined 38.5 percent during the same period due to sluggish exports.

Cho Mi-jin, an analyst at Cape Investment & Securities Co., said that KT&G will see further decline in cigarette sales due to softening demand in overseas markets. The company’s business environment in the Middle East, in particular, has deteriorated amid weakening Iranian currency against major foreign currencies upon U.S.’s renewed economic sanctions against Iran and the tax hike in the United Arab Emirates, the analyst said.

Despite disappointing results, KT&G shares finished Tuesday 1 percent higher at 101,000 won.

KT&G announced that cumulative sales of its heat-not-burn cigarette Lil reached 1 million devices in just 11 months since its launch in November last year. Sales of its heat-not-burn cigarettes have been upbeat and crossed break-even point in June.

KT&G’s subsidiary Korea Ginseng Corp. also raised 82 billion won in operating income in the third quarter ended September on sales of 404.5 billion won. Operating profit and sales were up 6.5

percent and 10.2 percent year-on-year, respectively, which buoyed overall investor sentiment.  Enditem