KT&G's Q1 net up 64 pct on price hike

KT&G Corp., South Korea's state-run tobacco producer, said Thursday its first-quarter net profit jumped 64.1 percent, due mainly to increased margin from price hikes and currency gains from dollar-denominated debts.

Its net profit came to 308.77 billion won ($284.72 million) on a consolidated basis in the January-March period, compared with 188.19 billion won a year earlier, the company said in a regulatory filing.

Operating income gained 64.7 percent on-year to 428.53 billion won in the first quarter, and sales rose 18 percent to 1.13 trillion won over the cited period, it said.

The numbers reflect the performances of KT&G and its subsidiaries, including the Korea Ginseng Corp.

Although the sales figure increased, the number of cigarette packs sold in the nation dropped 41.4 percent in the first three months from a year earlier following a sharp price hike, which nearly doubled the average price of cigarettes to 4,500 won per pack on Jan. 1 

Consequently, its market share shed 6 percentage points on-year to 56.6 percent as of end-March as foreign tobacco manufacturers delayed price hikes in January.

However, the company expected it would regain some of the lost share in the second quarter.

"Sales at convenience stores plunged in January, but they have been slowly recovering," Oh Chi-beom, a marketing director at KT&G said in a meeting with investors. "We expect sales to improve under the current quarter and will be able to release detailed forecasts on tobacco demand."

Despite the recent sales recovery, KT&G expected the tobacco price hikes will have a negative impact on the long-term earnings in the domestic market.

"We expect the long-term earnings will be hurt by falling demand due to the tobacco price hikes," Baek Bok-in, a managing director at KT&G, said.

Shares of KT&G jumped 6.24 percent to 98,700 won on the main bourse on Thursday on hopes for improved earnings, far outperforming the broader market's 1.38 percent gain. The earnings result was released during the trading hour. (Yonhap)