Ladies and gentlemen, I'm Aaron Lee, Head of Investor Relations at KT&G. Thank you for attending KT&G's 2026 first quarter results.

Today's presentation will be provided in English in simultaneous interpretation, and the Q&A session in consecutive interpretation. The materials can be found via the live webcast screen or downloaded from the company website.

Please allow me to introduce the management team in attendance today. With us, we have Mr.

Sang-Hak Lee, Chief Finance and Operating Officer; Mr. Young-Chan Yun, Chief Strategy Officer; Mr.

Chang-Woo Hur, Chief Marketing Officer; Mr. Min-Seok Kwon, Chief of Global Business; Mr.

Dong-Pil Kim, Chief of NGP; Mr. Sang-Joon Woo, Chief of Real Estate Business; Mr.

Yong-Bum Kim, Head of Finance Office; and Mr. Seung-Gyu Han, Chief of Future Strategy at KGC.

Please be advised that the earnings we are about to present today have yet to be audited by the outside auditor, therefore are subject to change in the audit process. Any forward-looking information discussed in the call today may differ from the actual results to be reported in the future.

With that, we will begin the 2026 first quarter earnings report. Today's presentation consists of key items from our consolidated results and earnings for each business segment.

After the presentation, we will proceed to Q&A with the management team in attendance. Please allow me to invite Mr.

Sang-Hak Lee, our COO, CFO, to share with you highlights of the 2026 first quarter earnings and some business updates.

Ladies and gentlemen, I'm Sang-Hak Lee, CFO and COO of KT&G. Thank you for joining us at our 2026 first quarter earnings release.

Please allow me to brief you on our key achievements in the first quarter of 2026. Our global cigarette business recorded highest ever quarter revenue with a growth trifecta of volume, revenue, and operating profit.

ASP increased combined with volume growth drove volumes up 15%, revenue 24.6%, and operating profit 56.1%. Amid tensions in the Middle East, we have secured safety stocks by promptly discovering alternative routes, and offtake sales are showing strong numbers still.

All regions, including APAC, Eurasia, and new markets, have shown stable sales growth, allowing us to project our overseas CC business growth to continue throughout the entire year. In NGP, the domestic and overseas earnings grew in tandem.

In Korea, we reached 47.4% in stick market share to solidify our leadership position in the market. lil AIBLE 3.0 that was launched in online channels in April is well received in the market, acknowledged for our product capabilities.

Going further, we are preparing to launch new products every quarter of this year to strengthen our firm dominance in the NGP market. Internationally, strong sales in big markets and favorable comparison against last year thanks to a normalized device supply chain drove significant increase in revenue.

We will sequentially expand our direct NGP business, starting with key markets in APAC and Eurasia. Our HFF business grew in both revenue and operating profits.

Profit-centered structural transformation, along with strong results from the Lunar New Year promotion, drove revenue up by 5.8% and operating profit by 53.3%. KT&G intends to foster a global nutrition business at group level, based on our competitiveness on red ginseng.

As the global F&B and health supplement market today is rapidly transitioning to functional materials and science-based solutions, we aim to diversify our business model from simply B2C to add B2B on materials. Through collaboration with Altria starting from May, we will launch energy drink products for US consumers, and we will also pursue additional partnerships with other parties.

Under resolution by the newly formed board of directors after our AGM, we have completed the full cancellation of our treasury shares worth approximately 1.8 trillion won. With it, we have exceeded the target for cancellation as announced in November 2024 via the corporate value-up plan for '24 to '27 ahead of schedule, canceling total 22.4% of issued shares across the three years.

Based on robust business growth and profitability, KT&G will continue its earnings-based shareholder returns. In the second half of this year, we plan to announce a new mid-to-long term shareholder return policy that focuses on stronger dividends.

I ask for your unwavering support and interest for KT&G going forward. Thank you.

Now, we will move on to details of our 2026 Q1 earnings in page 2. Q1 consolidated revenue was supported by a strong tobacco business, rising 14.3% year on year to 1.7036 trillion won.

Operating profit grew across all segments of tobacco, health functional food, and real estate to rise 27.6% to 364.5 billion won. Net income was lifted by higher operating profit and currency-related non-operating profits, rising 46.6% to 378.2 billion won.

EPS grew by 54.7% to 3,666 won. EBITDA rose by 25% to 442.7 billion won, with EBITDA margins at 26%.

Next to factors behind movement in earnings in page 3. Starting with the tobacco business.

Despite an increased cost of 15.6 billion won linked to higher volumes, improved product mix and pricing added 21.1 billion won, volume growth in overseas CC and NGP was 58.8 billion won, dollar appreciation against the won was 4.4 billion won increment, totaling to 68.7 billion won increase in profit for the tobacco business. HFF and real estate also saw increase in profit by 9.7 billion won and 3.6 billion won, respectively.

All in all, consolidated operating profit rose by 27.6% to 364.5 billion won. Let's move on to the results for each business segment in page 4.

First on the tobacco business. Tobacco business revenue was supported by overseas cigarettes that recorded highest ever quarter revenue, as well as strong results across the NGP business, to rise 17% YoY to 1.1559 trillion won.

Operating profit grew across domestic and overseas CC and NGP, growing by 27.2%, with operating margins growing 2.2 percentage points. The share of global sales in tobacco grew by 3.7 percentage points as the international cigarette business showed robust earnings, continuing our global business expansion.

Breaking down the tobacco business into segments in page 5. Beginning with domestic CC.

Quarter domestic CC market volume saw natural decline and transfer of demand to NGP, declining by 5.2% year over year. However, with new product launches catering to consumer needs, we continued our market share growth trend, with market share rising 0.4 percentage points, reaching 68.8%.

Moving on to page 6 for global CC. Global cigarette revenue grew by 24.6% YoY to reach record-high quarter revenue, proving the sustainability of our global growth.

Volumes grew across all regions of Eurasia, APAC, and new markets, rising by 15% to 18.01 billion sticks. While strong ASP increase continued, improvements in cost and SG&A efficiency added to once again drive up the profit significantly.

Next to NGP in page 7. NGP grew in both revenue and operating profit, thanks to growth in the domestic and international businesses.

Internationally, strong device and stick sales in key markets, including Russia, combined with a favorable comparison against last year that suffered a supply chain disruption on the device, led to growth in all stick volume, revenue, and operating profit. Next on details of the domestic and international NGP business in page 8.

Domestically, penetration of the HnB category reached 20%, expanding its presence, and with the growth of our lil AIBLE device and sticks, KT&G market share reached 47.4%, solidifying our leadership position. Internationally, expanded distribution coverage in Russia and new product launches drove volume growth.

Next is page 9 to HFF. Strong results from the Lunar New Year promotion in Korea and the boost from the CheongNok brand campaign drove HFF revenue by 5.8%.

In operating profit, higher revenue from high-profit channels, including online, and profit center strategy, including efficiency in marketing execution, led to profit growth of 53.3%. Share of global sales was reduced as domestic revenue grew.

Going into specifics of the domestic and overseas performance in page 10. In domestic revenue by channel, inflow of consumers via the Lunar New Year promotion and brand campaigns were mainly in high-profit online channels, supporting the revenue and operating profit growth.

Internationally, while revenue in China grew with the Lunar New Year promotion, US revenue decline drove down overall international revenue. Lastly on page 11 for real estate.

As construction rates progressed in development projects for Anyang, Mia, and East Daejeon, real estate revenue for the quarter rose by 16.4%. Operating profit grew as well, by 34.6%, with higher development project revenue.

This concludes the KT&G 2026 first quarter earnings release. We will now proceed to Q&A.

지금부터 질의응답을 시작하겠습니다. 질문을 하실 분은 전화기 버튼에 별표와 1번을 누르시기 바랍니다.

질문을 취소하시려면 별표와 2번을 누르시면 됩니다.

Thank you for taking my question. Would like to ask you three questions.

First, we have seen quite solid trend in terms of your global CC ASP. Would like to understand going forward, what is the level at which you're currently targeting, and also do you foresee there will be continuous improvement in terms of profitability?

Second question has to do with in the wake of the war in the Middle East, I believe that you are able to really hold onto your business quite well despite that difficulty. Would like to know what your take is in terms of how the market consumption is looks like in those markets, and also what your update is in terms of the inventory level and any update on logistics.

Third question has to do with your NGP business. Can you provide some color with regards to the update regarding your new platform?

네, 해외 궐련 사업의 ASP 상승 목표와 수익성 개선 계획, 그리고 중동 전쟁 이후의 현지 분위기 및 재고, 물류 상황 업데이트에 대해서는 해외사업본부장님께서 답변드리겠습니다. 이어서 NGP 사업의 26년 국내외 신규 플랫폼 출시 계획 및 기대 효과에 대해서는 NGP사업본부장님께서 답변드리겠습니다.

예, 해외사업본부장 권민석입니다. 질의하신 ASP 상승 목표 및 수익성 개선 계획에 대해 말씀드리겠습니다.

최근 해외 궐련 사업은 수량 및 ASP 동반 성장에 힘입어 고속 성장 중이며, 구조적 변화 등을 통한 수익성 개선은 지속될 전망입니다. 직접 사업 권역의 경우 구조적 변화를 통한 마진 구조 개선 효과가 이어지고 있으며, 브랜드 경쟁력을 기반으로 단가 인상을 지속적으로 추진할 계획입니다.

신규 진입 국가의 경우 캡슐 및 가향을 활용한 차별화된 고가 신제품 출시 등 제품 믹스 개선을 통해 수익성을 확대해 나갈 것입니다. 24년부터 2개년 연속 회사의 ASP는 두 자리 수 성장을 기록했습니다.

26년에는 신규 육성 국가를 적극적으로 개척하며 전년 대비 단가 상승 폭이 완만해질 수 있으나, 상승세는 계속되어 24년 대비 27년까지 20% 중후반대 성장이 전망됩니다.

Responding to your question, I am Kwon Min-Seok, Chief of Global Business Division. If you look at our global CC business, it's been growing quite rapidly, driven by a joint growth of volume as well as ASP increase.

We expect that driven by structural changes, such improvement in profitability will continue into the future. If you look at the markets where we're adopting direct business model, through structural changes, we are seeing impact in terms of improving the margin structure, and supported by brand competitiveness, we are continuously going to push for ASP hike.

For new markets, by leveraging the high-end new products such as capsules and flavored products, we are going to improve on our product mix, which will help us expand on profitability. For two years in a row starting 2024, the company's ASP has been posting a double-digit growth.

In 2026, we will actively make inroads into newly cultivated markets, which may moderate the ASP uptrend. However, that uptrend will continue, compared to 2024 up to 2027, we are expecting about mid-to-upper 20% growth.

다음으로 질의하신 중동 지정학적 이슈 관련 회사의 대응 현황 및 계획에 대해 말씀드리겠습니다. 회사는 전쟁 발발 즉시 대체 루트를 신속히 확보해 공급망을 안정화하였으며, 충분한 안전 재고를 확보하고 있어 관련 리스크는 크지 않을 것으로 보고 있습니다.

중동 전쟁 상황에도 현지 판매는 견조한 성장세를 보이고 있으며, 중동뿐만 아니라 전체 해외 궐련의

1분기 수량 및 매출액은 모두 성장하였습니다. 회사는 전쟁 장기화 또는 확전에 대비한 추가 대안 루트를 지속 검토하고 있으며, 중동 이슈에 따른 사업적 영향을 최소화하기 위해 관련 상황을 면밀히 모니터링할 계획입니다.

Responding to your second question about what the company's responses are and what our planning is in light of the geopolitical issue that is emerging in Middle East. Right after the war broke out, we were moved very quickly in securing an alternative route so as to stabilize our supply chain.

We do have safety stock in place, we do not believe that the impact from the war is going to create significant risk. Despite the war happening in the Middle East, our local sales are quite solid, and not just in the Middle East, if you look at the global CC business, our Q1 volume as well as the top-line revenue all posted a growth.

We are continuously reviewing alternative routes in case the war extends in terms of its duration or if the war escalates, but in order to minimize any potential business issue being impacted from the Middle Eastern issue, we are going to continuously, very closely monitor the situation. 네,

NGP사업본부장 김동필입니다. 질의하신 HnB 신규 플랫폼 출시 계획 및 기대 효과에 대해 말씀드리겠습니다.

회사는 지난 4월 신규 업그레이드 디바이스인 릴 에이블 3.0 판매를 온라인 채널로 확대했으며, 긍정적인 시장 반응을 확인하고 있습니다. 상반기 중 전국으로 커버리지를 확대하여 릴 에이블 플랫폼의 실적 성장세를 가속화할 계획입니다.

또한 2분기에 이어 3분기와 4분기에도 혁신 신제품 출시를 계획하고 있습니다. 하반기 출시 예정인 신제품 모두 사용자 편의성 개선을 통해 신규 소비자 유입 확대 및 기존 고객의 재구매 활성화를 이끌어낼 것으로 기대됩니다.

마지막으로 러시아를 비롯한 주요 해외 시장에 연내 업그레이드 버전의 디바이스를 출시할 계획이며, 이를 통해 릴 브랜드에 대한 소비자 충성도를 더욱 강화해 나가고자 합니다.

Responding to your question, I am Kim Dong-Pil, Chief of NGP Business. I will talk about our plan regarding the rollout of a new HnB platform and expected results.

Now in April, the company expanded the lil AIBLE 3.0 sales, a new and upgraded device, to the online channel, and we are seeing very positive responses from the market. We are going to expand the coverage to nationwide by the end of the first half of the year, and this is really going to help us further speed up growth of our lil AIBLE platform.

Also in Q3 and Q4, following on the trend that we've seen in the second quarter, we are planning for a additional launch of new and innovative products. All of these new products to be launched are going to significantly improve the user convenience, and it will help us acquire new consumers and also activate repeat purchases.

Last but not least, we are planning to roll out a upgrade version in the overseas market, including the Russian market, and through such endeavors, we believe that we will be able to solidify consumer loyalty to our brand, the lil brand. 다음으로 질문해 주실 분은 메리츠증권의 김정욱 님입니다.

26년도 중점이 좀 외형 성장인지, 수익성인지, 좀 우선순위에 대해서 좀 설명 좀 부탁드리고요. 두 번째, 또 서두에 말씀하셨던 이제 건기식 원료 B2B 사업 추진 계획에 대해서 좀 더 구체적인 설명 부탁드립니다.

그리고 마지막으로 26년도 이제 주주환원 정책에 대해서 좀 고도화되고 또 변화되는 상황들에 대해서 추가 설명 좀 부탁드리고, 26년 자사주 매입 소각 시점 그리고 비핵심 자산 매각 진행 상황 등 관련해서 좀 부연 설명 좀 부탁드립니다. 감사합니다.

Thank you. I would like to ask you three questions.

First, in regards to your HFF business, where would be your focus in 2026? Would it be more towards the scale, the top line, or more focus on profitability, the bottom line?

Second question, you did mention this during the opening presentation, but can you provide a little more detail with regards to this B2B business for your nutritional ingredient business? The third question is, are there any changes or any enhancements that you've made to your shareholder return policy for 2026?

Also, do you have plans to make additional treasury buyback or cancellation thereof, or are you reviewing any potential liquidation of non-core assets? 네, 건기식 사업의

26년 외형 성장과 수익성 중점 순위에 대해서는 KGC 전략본부장님께서, 원료 B2B 사업 추진 계획에 대해서는

KT&G 전략기획본부장님께서 답변드리겠습니다. 이어서 26년 주주환원 정책 고도화 및 변화 사항에 대해서는 수석부사장님께서 답변드리겠습니다.

네, KGC 전략본부장 한승규입니다. 질의하신 건기식 성장 전략에 대해 말씀드리겠습니다.

25년은 매출 감소에도 불구하고 수익성 중심의 전략적 운영을 통해 연간 영업이익 확대란 유의미한 내실을 다졌습니다. 26년 1분기에도 수익 중심 기조를 견지하였으며, 국내 설 프로모션 및 브랜드 캠페인에 따른 수요가 고수익 온라인 채널 중심으로 유입되며 매출 역시 반등하는 모습을 보였습니다.

26년에는 매출을 성장시키고 영업이익률을 개선하는 데 주력할 계획입니다. 원가율 개선, 프로모션 비용 효율화 등을 통해 수익성 관리를 지속해 나가는 가운데, 온라인 및 면세 등 전략 채널을 중심으로 고수익 차별화 제품군을 출시하여 외형과 수익성 동반 성장을 추진하겠습니다.

Responding to your question, I am Han Seung-Gyu, Chief of Strategy from KGC. I would like to briefly walk you through our growth strategy for HFF, health functional food business.

In 2025, despite the decline in top-line revenue, we focused on margin and profitability, and so we were able to drive a meaningful result of operating profit expansion. In Q1 of 2026, we continue to have that focus on profitability, and we ran Lunar New Year promotion as well as the brand campaign, which helped generate demand, especially around the high-margin online channel, which helped to rebound our top-line revenue.

In 2026, we're going to focus our effort on growing the revenue and improving the operating profit margin, as well as improving the cost base and also making our promotional spending more efficient. We will continue to rigorously maintain and control our bottom line, the profitability.

Also we will continue to roll out high-margin, differentiated product that would focus on online as well as DFS channel, which are considered strategic channels, so that we may drive growth in terms of top-line scale as well as profitability.

KT&G 전략기획본부장 윤영찬입니다. 질의하신 원료 B2B 사업 추진 계획에 대해 말씀드리겠습니다.

회사는 알트리아사와의 포괄적 협력의 일환으로 미국 음료 시장을 최우선으로 타겟팅하여 다수의 신규 타입 제품을 5월부터 순차 출시할 계획입니다. 나아가 KT&G 그룹 차원에서 원료 B2B 사업 등을 비롯한 글로벌 뉴트리션 사업을 본격적으로 육성하고자 합니다.

이를 위한 전략 실행 조직으로 KT&G에 글로벌 뉴트리션 센터를 신설하였으며, 이곳에 관련 역량과 인프라를 집중할 계획입니다. 또한 미국 내 글로벌 탑티어 기업 대상 원료 공급 및 공동 제품 개발을 통해 초기 레퍼런스를 확보하고, 이를 기반으로 KT&G 자체 제품 출시와 유럽, 아시아 등 글로벌 시장 확장을 병행 추진하겠습니다.

중장기적으로는 금년 내 설립 예정인 북미 인삼 연구소와 향후 공장 구축을 토대로 현지 생산, R&D, 사업화를 아우르는 북미 거점 완성형 사업 플랫폼을 구축하는 등 글로벌 뉴트리션 사업을 미래 핵심 성장 동력의 한 축으로 키워 나가겠습니다. Responding to your question, I am Yoon Young-chan, the CSO.

I will share with you what our B2B business plan looks like. As part of the umbrella agreement that we have with Altria, we are going to first target the United States beverage market, and we'll start to introduce new types of products starting the month of May.

At the KT&G group level, we are going to place full momentum behind fostering our global nutritional business, including the B2B ingredient business. In order to implement this strategy, KT&G has newly established Global Nutrition Center, and we are going to focus our capabilities and our infrastructure resources towards this nutritional center.

Also, we will initially build references by supplying ingredients to global top-tier companies in the United States, and through joint product development efforts, and also based on which we will roll out KT&G's own products while expanding global markets, including Europe and Asia. In the mid-to-longer term, we will develop our global nutritional business as a key future growth driver.

We will establish integrated North American business platform, incorporating and implementing local production, R&D, and commercialization, all of which will be built upon North American Ginseng Research Institute, which is scheduled for establishment before the end of the year, as well as our future manufacturing facility. 네,

KT&G 수석부사장 이상학입니다. 질의하신 그 2026년도 주주환원 정책 고도화 및 그 변화 상황에 대해서 잠깐 말씀드리겠습니다.

먼저 회사는 2024년 11월에 발표한 그 기업가치 제고 계획의 자사주 소각 목표 20%를 조기에 달성했습니다. 올해도 지난 2월 실적 발표에서 말씀드린 바와 같이 기존 계획에 따라서 시장에서 자사주 매입 소각을 진행할 계획을 가지고 있고, 주가와 시장 상황을 종합적으로 고려해서 매입 시점과 규모는 탄력적으로 운영하고자 합니다.

다음 그 비핵심 자산 유동화에 대해서도 말씀을 주셨는데, 우선 저희가 규모가 큰 을지로 타워, 남대문 호텔, 이렇게 분당 타워 해서 자산 매각이 일단 완료되었고, 또 일부 금융자산 매각을 포함해서 목표한 1조 원 규모의 자산 유동화가 이루어졌습니다. 다만 회사는 그 캐시플로우 상황에 따라서 비핵심 자산 유동화도 열려 있다, 이렇게 말씀을 드리겠습니다.

마지막으로 그 금년도에 달라질 주주환원 정책 방향에 대해서 말씀을 주셨는데요. 우선 이사회에서는 종전에 주주환원 계획의 목표가 자사주 소각 목표가 어느 정도 완성된 점, 그리고 핵심 사업 중심의 성장 투자가 있었고, 그 구조 혁신이 이익 성장으로 또 연결되고 있는 점, 이런 부분을 고려하고 있고, 다음 글로벌 그 피어 그룹들의 그 배당 성향, 최근 주가가 높아져서 낮아진 배당 수익률 등을 종합적으로 고려하고 있고, 이런 이해를 바탕으로 배당을 조금 더 강화해야 된다는 컨센서스가 이루어지고 있습니다.

새로운 주주환원 정책이 성안이 되면 올 하반기에 자본시장에 발표할 예정이고, 앞으로도 자본시장의 다양한 의견 듣고 기업가치 제고를 위한 최선의 노력을 계속해 나가겠습니다. 예, 이상입니다.

Responding to your question regarding any changes or enhancements made to our shareholder return plan, I am Lee Sang-Hak, Chief Finance and Operating Officer. Now we achieved that 20% target for treasury share cancellation earlier than what was planned for in the value enhancement plan of FY24 and 2027, which was announced back in November of 2024.

Now we will do share buyback and cancellation based upon this year's plan, and we'll consider and closely monitor and follow the market, as well as how the stock price moves, and operate nimbly in determining the right timing and the size of such share buyback, as well as cancellation. Now talking about the liquidation or sales of non-core asset.

We completed the selloff of Euljiro Tower and Namdaemun Hotel, and including also other certain financial assets, we completed the asset securitization, which amounted to around 1 trillion Korean won. In light of the cash flow situation, we will make appropriate decisions regarding securitizing or liquidating such non-core assets going forward.

You us- also asked about any changes or improvements that were made to our shareholder return plan. In the recent BOD at the company, the board of directors recognized that we had achieved our cancellation target of treasury shares, and that our investment towards our core business had driven certain growth of business, and also our innovation and structural enhancement effort has translated into higher level of bottom-line profit.

In light of the dividend payout at our global peer companies, and in light of the fact that the recent stock prices increase has actually brought down the dividend yield, those different elements are currently being considered, and there is actually a consensus that we still have room to further strengthen our dividend payout going forward. Upon those understanding and consideration, once the new dividend plan is drafted and finalized, we will be able to come back to the capital market and announce such upgraded shareholder return plan in the second half of the year.

We will continue to listen closely to the feedback and the views of the market, and will continuously endeavor to further enhance our corporate value going forward. 다음으로 질문해 주실 분은 모건스탠리의 김혜원 님입니다.

CC 담배 관련해서 좀 몇 가지 보고 싶은데요. 우선은 이제 원가 부분이 지금 어떻게 진행이 되는지 작년 말부터 저희가 좀 담뱃잎이나 이제 패키징 머티리얼 좀 안정되는 걸 보기는 했는데, 농상황도 있고 하니까 좀 원가 관련해서 가이던스를 주시면 좋을 거 같고요.

그리고 두 번째는 이제 저희가 연초에 이제 인도네시아 새 공장 오픈을 하시면서 계속해서 해외 공장으로 생산 믹스를 좀 옮기고 계실 거 같긴 한데, 이 과정이 지금 1분기 때 얼마큼 진행이 됐고, 좀 2분기나 이제 올해 봤을 때 혹시 계획 대비해서 어떻게 진행이 될 거 같은지 말씀해 주시면 감사하겠습니다.

Thank you for taking my question. I have a question relating to the cost for your tobacco business, your CC business.

I've seen that at the end of last year, we've seen the cost profile stabilized in terms of the tobacco leaf, as well as some packaging material. Can you provide a bit more color with regards to the guidance regarding cost?

Second question is you've opened your production facility in Indonesia, and I see that the company has intend to move its production base or shifts their production mix to overseas locations. What is the progress as of the first quarter, and what should we expect as we go into the second quarter?

What is the plan basically, that is the question. 네, 최근 원가 추이 및 전망, 그리고 해외 공장 생산의 믹스 변경 및 계획에 대해서 재무실장님께서 답변드리겠습니다.

예, 안녕하십니까?

KT&G 재무실장 김용범입니다. 질의하신 최근 원가 추이, 26년도 원가 전망, 해외 공장 생산 믹스에 대해서 말씀을 드리겠습니다.

우선 원재료인 잎담배의 경우 최고가였던 24년 원료가 소진되고, 조달원가가 낮았던

25년산 잎담배가 투입 개시됨에 따라 투입원가 안정화 및 수익성 개선이 전망이 됩니다. 나아가서 전사적인 원가 절감 프로젝트를 통해 재료품 원가를 안정화하고, 가공비를 절감하여 원가 최적화 기조를 가속화해 나갈 생각입니다.

마지막으로 회사는 중장기적으로 글로벌 생산 포트폴리오 재편을 통한 수익성 강화를 목표로 하고 있습니다. 글로벌 생산 거점 물량 확대를 통해 26년에는 해외 판매 수량의 50%를 해외에서 생산할 전망이며, 재료품 현지 수급, 낮은 인건비, 물류비 및 관세 절감 등을 통해서 수익성을 극대화할 계획입니다.

이상입니다. Responding to your question, I am Kim Yong-beom, Head of Finance.

I will talk about the recent cost trends that we are seeing and what the cost outlook is for 2026, and also the changes in the overseas production mix. In terms of the raw material, leaf tobacco, which was sourced back in 2024 at peak price, is now mostly depleted, and we started to input tobacco leaf sourced at low price in 2025.

Therefore, we expect stabilization of input cost and boost in profitability. Also through corporate-wide cost savings project, we plan to further stabilize cost of materials, save processing cost, so that we can accelerate achievement of optimized cost profile.

Now from a mid-to-longer term perspective, through revamping of our global production portfolio, our objective is to strengthen profitability of our businesses. As we expand production to our global production sites, basically our objective is to produce 50% of the outbound sales volume in the overseas sites in year 2026.

This will help us leverage off of local sourcing, lower labor cost, as well as logistics cost, and also save on tariff-related expenses, which will help us maximize company's profitability. 다음으로 질문해 주실 분은 다올투자증권의 이다연 님입니다.

PMI랑 NGP 판매 계약 두 번째 구간 진입하면서 직접 사업 진척되는 부분 좀 더 구체적으로 설명 부탁드리고요. 그리고 중장기적인 방향성도 같이 말씀 부탁드리겠습니다.

그리고 두 번째로는 저희 해외 궐련의 경우도 직접 사업으로 커버하시는 영역이 점점 더 많아지는 걸로 알고 있는데, 관련된 권역 성장 전략이나 현황 같이 말씀 부탁드리겠습니다. 감사합니다.

Thank you for taking my question. My first question relates to the phase 2 of your PMI relationship.

Would like to know as to what impact this will have in terms of your direct business, because there inevitably is going to be certain overlap. If you could provide color there, that would be helpful, and also what would be your direction going forward.

In terms of the global CC business, I believe that your direct business model is expanding. Accordingly, with that business model, what is your growth strategy?

네,

PMI 판매 계약 페이즈 2 진입에 따른 직접 사업 현황, 전망에 대해서는 NGP사업본부장님께서, 그리고 해외 궐련 사업의 직접 사업 권역 성장 전략에 대해서는 해외사업본부장님께서 답변드리겠습니다. 네,

NGP사업본부장 김동필입니다. 질의하신 NGP 직접 사업 현황 및 전망에 대해서 말씀드리겠습니다.

KT&G와 PMI는 글로벌 시장 환경을 고려하여 합리적인 범위 내에서 보증 수량을 조정하고, 가장 효율적인 사업 구조로 파트너십을 구조화하였습니다. 회사는 PMI의 보증 수량을 확보하는 한편, 일부 국가를 제외한 거의 모든 국가에서 릴 하이브리드와 릴 에이블 플랫폼에 대한 자체 상업화 권리를 확보하였습니다.

이에 따라 해외 법인의 궐련 사업 경쟁력을 활용할 수 있는 아태·유라시아 권역 핵심 국가에 연내 우선 출시를 추진하고, 상업화 파트너사 발굴 또한 병행해서 추진할 계획입니다. 회사는 지속적인 혁신 신제품 개발을 통해 PMI와의 협력 사업에서 안정적인 성장을 유지하는 한편, 직접 사업 영역 또한 확장해 나가며 글로벌 성장 모멘텀을 한층 강화해 나가겠습니다.

이상입니다. Responding to your question, I am Kim Dong-Pil, Chief of NGP Business.

I will talk about the current status as well as outlook for our direct business. In light of the global market environment, KT&G and PMI have structured its partnership in the most efficient way through adjusting the guaranteed volume within a reasonable scope.

Company KT&G, we were able to secure PMI's guaranteed volume, and also excluding certain number of countries, we now have the commercial right to directly provide our lil HYBRID and lil AIBLE platform products. Accordingly, we are going to roll out within the end of this year in key markets, including Asia-Pacific and in Eurasia markets, where we could leverage our existing global CC competitiveness.

At the same time, we will continuously look for a partner, our commercial partner, in this process. Through continuous development of innovative and new products, we are going to sustain a steady level of growth under the arrangement with PMI, but at the same time, directly expand our business directly on our own so that we can further up our global growth momentum.

예, 해외사업본부장 권민석입니다. 질의하신 직접 사업 권역 성장 전략에 대해 말씀드리겠습니다.

회사는 전 권역에서 수량 및 수익성 동반 성장을 통해 해외 궐련 사업의 강력한 성장 모멘텀을 지속해 가고자 합니다. 우선 아태 권역의 경우 국가별 특성을 고려한 차별화된 신제품을 출시하고 신규 국가 진입을 통해 커버리지를 확대할 계획입니다.

나아가 인도네시아 신공장 준공 등에 따라 해외 생산 확대를 통해 제조원가 및 물류비를 절감하여 외형 성장과 수익성 개선을 동시에 달성하고자 합니다. 유라시아 권역의 경우 전년도 유통망 개선에 따른 수량 및 ASP 증가와 카자흐스탄 생산 기지 활용에 따른 관세 절감 효과가 두드러지며 1분기 매출과 이익 모두 성장했습니다.

에쎄, 보헴 등 고가 브랜드 라인업 확장을 통해 제품 믹스 개선을 더해 수익성 중심 성장을 이어 나가겠습니다. 회사는 앞으로도 성장 잠재력이 큰 지역을 중심으로 직접 사업을 확대하여 시장 침투를 가속화할 계획입니다.

이상입니다.

Responding to your question, I am Kwon Min-Seok, Chief of Global Business. I will talk about our growth strategy regarding our direct business markets.

Across all of the markets, the company, we want to be able to continuously drive our global CC businesses' growth momentum by driving a volume growth as well as profitability growth of our business. First, if you look at Asia-Pacific, we are fully mindful of each nation's characteristics, which will be used in developing new and differentiated products that best befit those specific markets, and also by entering into new countries, we are planning to expand on coverage.

At the same time, with the new plant in Indonesia now complete, we will be able to expand our overseas production, which will help us save on manufacturing cost as well as logistics cost, and that will help us achieve both growth in terms of scale as well as improvement in profitability. In terms of the Eurasia markets and zone, last year, we had improved our distribution channel, which helped us drive up volume sales as well as increase the ASP.

Also as we are making use of the plant located in Kazakhstan, we were able to gain tariff-related savings, which really helped with revenue growth and profit growth in the first quarter. We are also, going forward, going to focus on margin-focused growth by diversifying the product mix around high-end or highly priced brand lineups that include brands such as ESSE and Bohem.

Moving forward, the company is going to continuously focus on markets and geographies where there is high potential for growth so that we can speed up our market penetration. 네, KT&G 2026년 1분기 경영실적 발표 컨퍼런스 콜을 모두 마치도록 하겠습니다.

참석해 주신 여러분들께 진심으로 감사드리며, 모두의 안녕과 건강을 기원드립니다. 추가적인 질문은 언제든지 IR센터로 연락 주시기 바랍니다.

감사합니다. This brings us to the end of first quarter 2026 earnings conference call of KT&G.

Thank you very much, everyone, for joining us, and for any unanswered questions, please feel free to call us at our IR team. We wish you good health.

Thank you. An agent will be in touch with you.

Have a nice day.