KT&G Announces Corporate Value-up Plan, Including KRW 3.7 trillion Shareholder Return Plan and 15% ROE Target

Rhea-AI Summary

KT&G announced its 'Corporate Value-up Plan', targeting a 15% ROE by 2027, up from the current 10%. The company plans to return KRW 3.7 trillion to shareholders through 2027, including KRW 2.4 trillion in cash dividends and KRW 1.3 trillion in share buybacks. The plan includes streamlining Capex investment from KRW 3.5 trillion to KRW 2.4 trillion, while maintaining expected returns. KT&G will secure KRW 1 trillion through restructuring low-yield assets and plans to cancel 20% of outstanding shares by 2027. For 2023, the company approved an additional KRW 150 billion share buyback and cancellation, bringing total shareholder returns above 100%.

Positive

• ROE target increase from 10% to 15% by 2027
• KRW 3.7 trillion shareholder return plan through 2027
• KRW 1.1 trillion cost reduction in Capex investment while maintaining expected returns
• Plan to cancel 20% of outstanding shares by 2027
• Additional KRW 150 billion share buyback and cancellation in 2023

Negative

• Significant reduction in Capex investment from KRW 3.5T to 2.4T
• Need to divest non-core and low-yielding assets

- Additional returns to be executed in share buyback and cancellation worth KRW 150 billion within the year, with total return to shareholders exceeding 100 percent

SEOUL, South Korea, Nov. 10, 2024 /PRNewswire/ -- KT&G Corporation ("KT&G" or the "Company") (KRX:033780), announced the 'KT&G Corporate Value-up Plan' on the 7th, that includes their goal of achieving 15% ROE and returning KRW 3.7 trillion to shareholders by 2027.

Under the plan, KT&G aims to significantly increase its ROE (return on equity) from the current 10% level to 15% by 2027 through 'profitability improvement', 'asset efficiency', and 'financial optimization'.

To improve profitability in its main business, KT&G plans to refine its focus areas within each of its three core businesses (Overseas Cigarettes, NGP, and Health-functional Food) and upgrade its business operations through continuous expansion. In addition, the company plans to secure approximately KRW 1 trillion in cash through restructuring of low-yield and non-core assets such as real estate and financial assets, and utilize these resources for growth investment and shareholder return to improve capital efficiency.

In particular, the company plans to increase investment efficiency by innovating its Capex investment strategy, including by strengthening global production partnerships. KT&G has streamlined its Capex investment plan (2023-2027) of KRW 3.5 trillion, which was announced in November last year, to KRW 2.4 trillion. Despite the streamlining of the investment scale, the expansion of production capacity and expected return on investment are expected to remain at the same level as originally planned.

Meanwhile, the company's shareholder return policy will be strengthened to reach top level domestically and internationally. Over the four-year period from 2024 to 2027, a total of KRW 3.7 trillion will be returned to shareholders, including cash dividends of approximately KRW 2.4 trillion and share buybacks of KRW 1.3 trillion. In addition, the "KT&G Plus Alpha Program" will be implemented to utilize resources generated from asset efficiency for additional shareholder returns. The additional resources will be prioritized for share buybacks and immediate cancellation, and 20% of the total outstanding shares (133,822,497 shares as of 2023) is expected to be cancelled by 2027 under the enhanced shareholder return policy.

Under the new corporate value-up plan, the scale of share buyback and cancellation will also be expanded for this year. On the 7th, KT&G's Board of Directors resolved to repurchase and cancel 1.35 million shares within the year, using KRW 150 billion of the financial resources secured through divesture of non-core and low-yielding assets. As a result, KT&G's total return to shareholders this year will reach KRW 1.4 trillion, including the cancellation of existing treasury shares, and the total return to shareholders will exceed 100%. The scale of the share cancellation is also expected to reach approximately 6.3% of the total outstanding shares as of end 2023.

"We have been promoting corporate value growth and maximizing shareholder value by strengthening our core competitiveness with ROE as a key indicator," said Lee Sang-Hak, Senior Executive Vice President of KT&G. "We will continue to do our best to satisfy all stakeholders, including our shareholders, by raising corporate value to the highest level globally."

FAQ

What is KT&G's (KTCIY) ROE target for 2027?

KT&G aims to achieve a 15% ROE by 2027, up from the current 10% level.

How much will KT&G (KTCIY) return to shareholders through 2027?

KT&G plans to return KRW 3.7 trillion to shareholders by 2027, including KRW 2.4 trillion in cash dividends and KRW 1.3 trillion in share buybacks.

What percentage of shares will KT&G (KTCIY) cancel by 2027?

KT&G plans to cancel 20% of its total outstanding shares (133,822,497 shares as of 2023) by 2027.

How much will KT&G (KTCIY) spend on share buybacks in 2023?

KT&G will spend KRW 150 billion on share buybacks and cancellation in 2023, purchasing 1.35 million shares.