Indonesia to become KT&G's largest overseas production base

Annual capacity to reach up to 35 billion cigarettes

New factory to serve as export hub and boost shareholder value

KT&G announced Wednesday that it has completed its "global five-point production network" by launching full operations at its new factory in Indonesia. Pictured at the opening ceremony, from left, are South Korean Ambassador to Indonesia Yoon Soon-gu (fifth from left), East Java Provincial Secretary Adi Kariono and KT&G President Bang Kyung-man. [KT&G]
KT&G announced Wednesday that it has completed its "global five-point production network" by launching full operations at its new factory in Indonesia. Pictured at the opening ceremony, from left, are South Korean Ambassador to Indonesia Yoon Soon-gu (fifth from left), East Java Provincial Secretary Adi Kariono and KT&G President Bang Kyung-man. [KT&G]

KT&G announced Wednesday that it has launched full operations at its new factory in Indonesia, completing what it calls a "global five-point production network" spanning South Korea, Indonesia, Russia, Kazakhstan and Turkey.

KT&G entered the Indonesian market — one of the world's major tobacco markets — in 2011 through a local acquisition. The company currently holds fourth place in market share, led by its globally top-ranked ultra-slim brand ESSE and its Indonesia-exclusive brand JUARA.

To meet growing demand, KT&G pursued construction of the new factory alongside its existing first plant in Indonesia. The company signed an agreement with Indonesia's Investment Ministry in September 2023 and broke ground on the new facility in April the following year. Trial operations began in the first half of this year.

The new Indonesian factory, which has now entered stable production, will eventually house nine cigarette manufacturing lines, giving it an annual maximum capacity of 21 billion cigarettes. Combined with the existing plant's capacity of 14 billion cigarettes, Indonesia is expected to become KT&G's largest overseas production country, capable of producing up to 35 billion cigarettes per year.

KT&G plans to leverage Indonesia's geographic advantage — situated between the Pacific and Indian oceans — to export cigarettes produced at the new factory not only to the domestic market but also to countries including Taiwan, Mongolia, Nigeria and India. The facility is also expected to serve as a forward export base targeting global markets beyond the Asia-Pacific region.

The new factory also marks the fruition of a growth investment drive that began in January 2023. Following the completion of a new factory in Kazakhstan in April last year, KT&G has now largely wrapped up overseas capital expenditure totaling 2.4 trillion won ($1.79 billion) with the launch of the Indonesian facility.

The combined maximum annual production capacity of KT&G's four overseas factories in Indonesia, Russia, Kazakhstan and Turkey is projected to reach 65 billion cigarettes. The company plans to raise the share of overseas production to more than 60 percent by 2028. Backed by strengthened financial stability, it also intends to continue enhancing shareholder value through share buybacks and cancellations and dividend increases.

"With the Indonesia factory as the final piece, KT&G has concluded its large-scale overseas capital investment and established a 'global five-point production network' that will serve as a solid foundation for our global business and future growth," KT&G President Bang Kyung-man said. "We will maximize profitability through the strategic use of our production bases at home and abroad, strengthening our overseas business competitiveness to enhance shareholder and corporate value."

An exterior view of KT&G's new factory in Indonesia [KT&G]
An exterior view of KT&G's new factory in Indonesia [KT&G]

spa@heraldcorp.com