Ladies and gentlemen, this is Kate Park, Head of Investor Relations at KT&G. Thank you for attending KT&G's 2023 4Q and full year earnings report. Please allow me to first introduce the KT&G management team in attendance today. We have Mr. Jin-Han Kim, Chief Strategy Officer, Mr. Seong-sik Park, Chief of Marketing, Mr. Kwang-il Park , Chief of Real Estate Business, Mr. Jeong Jo, Chief of Global Business, Mr. Wangseop Lim , Chief of NGP Business, Mr. Youngchan Yoon, Head of Strategy and Planning, Mr. Yongbum Kim, Head of Finances, and Mr. Kyu Beom Lee, Chief of Strategy at KGC.
I must advise you that the earnings we are about to present today have yet to be audited by the outside auditors, therefore, are subject to change in the audit process, and any forward-looking information discussed in the call today may differ from the actual results to be reported in the future. With that, I will now hand it over to Mr. Jin-Han Kim, our CSO, to brief you on some details on our shareholder return plan as resolved at the board today.
Ladies and gentlemen, I am Jin-Han Kim, CSO at KT&G. I would first like to express my appreciation for all the interest and support you have shown for the company. Before we go into the Q4 and full year earnings report for 2023, I wish to share with you decisions on shareholder returns resolved at our board of directors meeting today.
In November 2023, KT&G announced a mid- to long-term shareholder return plan spanning three years, from 2024 to 2026, of KRW 2.8 trillion cash return and share cancellation of approximately 15% of today's total outstanding shares, to reinforce predictability in the market and enhance shareholder value. As announced, among the KRW 2.8 trillion cash return, KRW 1.8 trillion will be used for dividends under our policy of constantly rising DPS, and about KRW 1 trillion will be used for new share buybacks. The repurchased shares going forward will be canceled immediately after acquisition, and we communicated that this will be in the scale of about 7.5% of outstanding shares for the next three years.
We also promised that we will be canceling our existing treasury shares in the three years in the scale of 7.5% of outstanding shares. As a first step into the 2024-2026 shareholder return plan, our board has resolved today to cancel 3.5 million treasury shares, which translates to 2.6% of total outstanding shares. The value of the shares to be canceled will be approximately KRW 315 billion, based on yesterday's closing price, and the cancellation will take place on February sixteenth. Also, the year-end dividend for 2023 has been decided as KRW 4,000 per share, and this is to be approved at the upcoming AGM in March. For your reference, in August last year, we have executed interim dividends of KRW 1,200 per share.
In the H2 of this year, we will acquire new shares and cancel them to continue enhancing shareholder value. Going forward, any decisions made on the matter by the board of directors will be communicated with the market in a transparent and timely manner. KT&G will continue to duly fulfill its promise with the market to carry out top-level shareholder returns and maximize shareholder value. I ask for your continued support for the company. Thank you.
And now we will begin the 2023 4Q and full year results. Thank you for attending our quarterly earnings report call today despite your busy schedules. For today's presentation, I will begin with the highlights of our consolidated results and move on to each business segment. Starting with the key takeaways of our 2023 results.
In 2023, our three core businesses, namely Global CC, NGP, and Health Functional Food, drove the growth of the entire group, with our consolidated revenues reaching another record high. Particularly, the operating profit growth of the three businesses outpaced the revenue growth. In Global CC, expansion of direct business and nurturing of new markets led to a 7.7% volume growth. Revenue was driven by volume growth and pricing in key regions to rise 12.8% versus the previous year and reached record high revenue for the Global CC business. Volume growth also continued in NGP Sticks, especially for the global business. Robust growth in stick sales within launched markets improved the profitability of the business. In Global Health Functional Food, revenue in China, our key priority target market, grew 47.6%, strengthening the momentum for global business expansion.
In 2024, we do expect the impact of material cost headwinds to persist, but our top line is projected to grow more than 10% and our bottom line more than 6%, driven by the three core businesses.... I will now move on to Q4 consolidated results. Q4 revenues, supported by stronger sales in tobacco and HFF, showed a 3.2% YoY growth to stand at KRW 1.4512 trillion. However, Q4 operating profits, impacted by higher costs due to global inflation and temporary costs related to Suwon development project in real estate, suffered a 1.4% YoY decline to KRW 198.6 billion.
Net income was affected largely by currency fluctuations within the quarter, with higher currency-related profits leading to a KRW 177.1 billion increase in net income, which stood at KRW 117.1 billion for the quarter, with EPS at 1,105 KRW. Q4 EBITDA declined 0.6% year-over-year at KRW 260.3 billion, and the EBITDA margin of 17.9%. The three core businesses supported the growth of the top line in the full year, which recorded KRW 5.8724 trillion, an all-time high for the company. The bottom line, affected by stronger cost headwinds from global inflation and the completion of large-scale property development projects like Suwon and Gwacheon, saw a 7.9% YoY decline to KRW 1.1679 trillion.
Currency-related profits due to currency fluctuations drove down net income by 7.8% YoY to KRW 926.6 billion, and the EPS was KRW 7,866. Annual EBITDA was KRW 1.409 trillion, 4.6%-5.6% lower versus the previous year, and the EBITDA margin at 24.0%. Zooming in on major factors behind movement in profit. In the 4Q, improved profits across tobacco, HFF, and other business segments were more than offset by a steep KRW 72.1 billion decline in real estate profits caused by completion of large projects, including Suwon and Gwacheon, as well as temporary costs following the completion of the Suwon development. Consolidated operating profits were down KRW 2.8 billion YoY. Next on factors behind profit movement for the full year.
Annual profits, despite improvement of KRW 42 billion in HFF and other businesses, was impacted by cost headwinds, overshadowing improvements in profit and the KRW 110 billion profit decline in real estate to lead to a 7.9% YoY drop to KRW 1.1679 trillion. I'll now move on to the performance of each business segment. First is on the tobacco business. Tobacco revenue in the quarter was driven by a higher global CC revenue and stronger domestic duty-free sales to rise 4.7% YoY to KRW 900.6 billion. Full year revenue rose by 1.3% year-over-year to KRW 3.619 trillion.
In Q4 operating profits, improved sales mix with stronger representation from high-margin products brought about a 25.9% increase in profits for this quarter to KRW 228.4 billion. However, the surge in materials prices, including leaf tobacco, put pressure to the full-year operating profits, which declined by 3.2% YoY to KRW 977.1 billion. In the quarter, global business was impacted by a temporary adjustment of shipments in some regions, accounting for 55% of total operations, which is a 1.5 percentage point drop. Global business in the full year, however, increased by 2.6 percentage points to reach 57%, as international NGP sticks and cigarettes both grew in volume. Let us go deeper into segments within the tobacco business. Beginning with domestic cigarettes.
Sales of our domestic cigarettes in 2023 was impacted by a 2.1% decline in market volume, leading to a 1.1% decline to 40.66 billion sticks. For our share of market, despite intensifying competition throughout the year with aggressive new product launches from competition, as we launched new products catering to consumer needs, our share rose by 0.6 percentage points to 66%, continuing growth for 9 consecutive years.
On domestic CC revenue in Q4, duty-free sales, a high-margin channel, grew by 71.5% YoY to more than offset the drop in market volume to drive a 7% YoY revenue growth to KRW 413.6 billion. Full year revenue also overcame the decline in market volume, supported by recovery in duty-free, to grow 1.1% YoY to KRW 1.6779 trillion. Next is on global cigarettes. Annual global cigarette volumes grew 7.7% to 53.15 billion sticks through expanded direct business, including Indonesia and nurturing of new markets, including Africa and Latin America. However, the numbers for the quarter was impacted by temporary adjustment of shipments in some regions to see a 7.6% decline YoY to 11.79 billion sticks.
Stronger sales volume, combined with pricing in key regions, led to a 10.4% increase in Q4 revenues to KRW 287.3 billion, and full-year revenues grew by 12.8% to KRW 1.1394 trillion, which is the highest ever for our global cigarette business. Moving on to NGP. In Korea, new product launches and aggressive promotions from competitors intensified the competition for NGP. But an expanding NGP market and our product launches led to higher volumes, resulting in domestic NGP revenue 11.5% higher than the previous year at KRW 519.3 billion. However, global NGP revenues suffered unfavorable comparison from the advanced device exports in the previous year amid the global supply disruption, with overall NGP revenues down by 11.1% YoY to KRW 779.4 billion.
Despite drop in device export volumes, stick sales, which represent the growth potential of the entire NGP business and its profitability, continued growth both in and outside Korea. Domestic stick volumes were up 14.4% YoY at 5.71 billion sticks, and global stick volumes up 43% at 8.24 billion sticks. A little bit further on NGP performance. Penetration rates of NGP in Korea, supported by higher conversion of consumers and new product launches, continued its growth trend to rise 2.3 percentage points to 19.4%. KT&G stick market share was at 46.6%, which was affected by aggressive promotion from competition, maintaining market-leading position with stronger competitiveness with the launch of lil HYBRID 3.0.
In the global business, despite the absence of new markets in the year, higher penetration within launched markets continued to support stick volume growth. We expect to see such penetration to expand further going forward, and the higher share of sticks within the mix to lead to even more improved profitability. Moving on to HFF. Q4 HFF revenues saw 21.9% YoY growth to KRW 336.1 billion, as standalone stores in Korea and DFS revenues grew along with overseas HFF sales. Full year HFF revenues were up 0.3% to KRW 1.3938 trillion. Operating profits in the quarter was supported by stronger contribution from high-margin channels and high-margin products overseas to see a turnaround to profits.
Full year operating profits were up 32.6% YoY to KRW 116.4 billion, thanks to holistic profitability enhancement initiatives and stronger high-margin products overseas. Global sales in Q4 increased by 6.4 percentage points YoY to 42.7%, with a robust revenue growth internationally, and global revenue shares in the full year was up 3.7 percentage points to 24.2%. Breaking down the revenues domestically and globally. Starting with domestic revenue for the quarter, as you look into the revenues by channel, increase in revenue within standalone stores and the recovery of duty-free drove domestic HFF revenue by 9.6% to KRW 192.5 billion.
For the full year, while channel stores' revenues grew mainly among duty-free stores, subdued consumer sentiment in Korea and a shrinking market put revenues down 4.3% to KRW 1.0565 trillion. Q4 revenues overseas benefited from holidays, including Chinese Black Friday and the US Thanksgiving, as well as vitalized sales in ginseng roots, including in Taiwan, to rise by 43.3% to KRW 143.6 billion. Annual revenues overseas saw strong growth in China via online-based marketing initiatives... to increase 18.4% YoY to KRW 337.3 billion. Lastly, on real estate numbers.
In Q4 real estate, revenue from development projects on legacy properties in Greater Seoul led to higher development revenues, but subsidiary revenues were reduced as Gwacheon project came to an end, and revenue from DNC Dogan was partially reduced, driving down total revenue by 31.9% to KRW 130.4 billion. Q4 operating profit was impacted by completion and one of the infrastructure costs of the Suwon project to see a year-over-year decline. In full year profits, costs from new development projects in the H1 and completion of Suwon and Gwacheon development projects drove down profits by 60.9% to KRW 70.5 billion. I will now move on to our guidance for the year 2024.
Going into 2024, we foresee high material costs to persist, market competition to intensify, and consumer purchasing power to shrink, giving us a continued unfavorable business environment. However, KT&G will engage in sophisticating our cost management system, expanding our penetration into the global market, and increasing our global ASP to do our utmost in bolstering our top line and profitability, making the year of higher growth and rebounding profits. As these efforts materialize, we target our consolidated revenue to grow 10%-10.5% and operating profits by 6%-6.5% versus the previous year. Especially, we aim to ensure our three core businesses to grow 15% in revenue and 31.5% in operating profit to see our bottom line growth outpace our top line growth.
Also, on our shareholder returns, KT&G announced during the value day in November that for 3 years from 2024 to 2026, we will be paying out about KRW 2.8 trillion in cash returns and canceling about 15% of today's total outstanding shares as our mid- to long-term shareholder return plan. As a first step to this return plan, as announced earlier, we will cancel 3.5 million treasury shares, which translates to about KRW 315 billion. To continue with this effort in the H2 of this year, we will repurchase shares and cancel them immediately after acquisition to keep the promise we have made to the market. The board also resolved on the year-end dividend for 2023 as KRW 4,000, combined with the already paid interim dividend for KRW 1,200.
This makes total dividends of the year KRW 5,200. Going forward, KT&G will duly fulfill the shareholder return plan that we promised to our shareholders as we strive to enhance shareholder value. Please refer to the materials for details of our 2024 guidance. This concludes the earnings report of KT&G on Q4 and the full year of 2023. We will move on to Q&A.
Now, Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and two on your phone. The first question will be presented by Jeong Won Kim from Meritz Securities. Please go ahead with your question.
[Foreign Language]
Yeah. Thank you for the opportunity to ask questions. I have three questions in total, the first being, for the domestic CC. So I think in the presentation, it was mentioned that the anticipated market volume decline is 4.5%-5%. That seems to be a larger, margin of decline compared to the previous years. Are there any special drivers that your forecast is like this? And we did mention before that there will be continued cost burden, cost pressure on, the company to experience. I think that was at level of last year, around KRW 200 billion. In comparison to 2023, do you have any guidance on which that level would be for 2024?
...The second question is with regards to the health functional food. So I think there have been ongoing efforts to improve profitability for this segment. But this year there hasn't been much movement or differences in terms of the operating profit target. Are there any special reasons for that? And the third question is related to real estate. So it seems that there are going to be new developments in the real estate sector, moving forward. I would like to get more details on the projects that will be carried out. And also, if you have a timeline per project, it would be appreciated if you could share that as well. Thank you.
[Foreign Language]
Yes. First, I would like to take the question for the forecast in terms of the large decline for domestic CC. This is Chief of Marketing, Seong-sik Park. So if we look at the overall trend globally, it seems to be quite common that there is a natural decline due to the overall involvement or increased interest in health and also the natural decline of population. So as a result, we are seeing a decline in market volume, and we are also seeing impact from the increased portion of the NGP market, mainly the heat not burn segment, and that those are the main factors that we believe. Thank you.
[Foreign Language]
Yes, I would like to answer the next question. This is Jin-Han Kim, the CSO of the company in terms of the impact on the cost burden and the level, moving forward. As you asked in your question, and as I've mentioned before, for the tobacco leaf that was purchased in 2022, that will be inputted into the product in 2023, there was a price increase of 14.3% on a YoY basis. For the tobacco leaf to be input into product this year, which was bought in the year 2023, there was a 13.7% increase in terms of price on a YoY basis. So if we take a look at that, in comparison, it's 14.3% and 13.7%, so it's at a similar level.
So there are going to be continued impact from a cost pressure side from the rise of the tobacco leaf prices. So overall, because of such factors, we believe that the cost burden coming from the main material, tobacco leaf, will continue for the time being. However, we also have to consider not only the main raw material, the tobacco leaf, but the non-tobacco material as well. And the non tobacco material also has a considerable burden on the cost structure, and we see the non-tobacco material actually quite stabilizing in terms of the prices during the period of 2023. So in the long term, we are cautiously forecasting that the overall cost burden in terms of the pressure will be mitigated.
[Foeign Language]
...With regards to the questions in terms of the health functional food profitability. So we have carried out multiple efforts to increase profitability of the health functional food products in the since the H2 of 2022, such as price increases, cost optimization efforts, and reduction of the cost of goods manufactured. We have made a lot of efforts to improve profitability. Though we also do have to consider that there are a lot of strategic investments being made in the global market, and we will continue to try to make improvements to our profitability by trying to increase the portion coming from our global business and also high margin products.
In the mid to long term, we believe that the right direction to take is to expand further our global business and also solidify our domestic business as well, to secure a high level of profitability. We do believe that moving forward, we will also prioritize prior profitability securing as a top top priority. For the full year, though, we have to consider that in order to expand our global business, there have been also on the heels of last year investments that are planned for this year as well. So all in all, considering such investments to be made, we will still try to make efforts to improve our profitability and keep the profitability level up than the guidance provided.
[Foreign Language]
This is Kwang-il Park , Chief of Real Estate Business. I would like to take your question on the real estate side. So in terms of the projects that are currently under preparations, we have been good to undergoing preparations for Mia and East Daejeon project since last year, and we're also looking into the completion of construction of this year in March for the Anyang Hogye, which is the size to about 1,100 pyeong. In 2025, in the H2, we're also making preparations for the factory site, the production site development in Cheonan. And we also have a considerable portion of stake in the Cheongna complex to the size of 80,000 pyeong as well.
So we do believe that from that there will be also for that Cheongna project the sales the pre-sales activities going on from the end of 2025 to be expected. So right now, currently, if we take a look at the status of the real estate market, it's quite stagnant. I think we are still undergoing necessary preparations on our side to make preemptive efforts to respond to the market conditions and also equity investments, so that we could have a lot of the revenue and profit decline since the Suwon project and the Gwacheon project offset. So the main direction moving forward for the real estate business will be to try to improve both the revenue and profit together.
The following question will be presented by Sangj un Park from Kiwoom Securities. Please go ahead with your question.
[Foreign Language]
Yes. Thank you for the opportunity to ask questions. I have three questions in total. The first questions would be with regards to the CapEx size for this year. So if you could provide some more details in terms of the newly planned investments, which projects they will be going into, that would be much appreciated. The second questions is regarding the guidance. It seems that, for the revenue growth, our target for global CC, it's set quite high. So would that be because of volume or also, price increase impact is included there as well? I would like to know, more details there. If price increase impact is also included, if you could provide some more details into which region or level of price increase, that would be appreciated. And third question is with regards to NGP.
So last year, I think in terms of new market entry, and new countries, it wasn't that many. So there was a weak performance in terms of revenue of devices as a result. If you could provide some more details into the newly planned entered countries for this year, that would be great.
[Foreign Language]
Yes, this is CSO Jin-Han Kim. To answer the question on CapEx. So we did provide CapEx plan on Investor Day of last year of KRW 3.9 trillion. Revised that on that early day in November to KRW 3.5 trillion Korean won. In 2023, if you look at the total CapEx that was executed, it was KRW 500 billion, excluding maintenance, KRW 0.4 trillion or KRW 400 billion was spent on the three core businesses. For the execution rate in terms of versus plan, for the CapEx investment for NGP, it's according to the plan. For CC, it's about 70% compared to against the plan.
This year, for the CapEx, we are expecting the CapEx investment size to be about KRW 1.1 trillion, excluding maintenance, at KRW 0.8 trillion, will be invested into CC, NGP, and HFF. Mainly, if we look into the details for the CapEx investment, they will be spent on the Indonesian overseas business. Also, the Kazakhstan plant for the CC plant capacity expansion. Domestically for NGP, there will be investments into the facility CapEx upgrade for our Gwangju plant that are currently planned. So moving forward, we will also look very closely at the market conditions and the situation to execute the CapEx plan that has been set forward.
Looking at both of such factors, we will closely monitor and make adjustments to the plan accordingly and make all the efforts to make the investments in an effective and timely manner.
[Foreign Language]
... This is Chief of the Global Business, answering the question on our global CC revenue guidance. So you asked whether the factors are volume driven or ASP price increase driven. And I would like to say that there are both factors at play and a little bit more detail to be provided on the ASP increase side. So if we look at the supply price of what we are supplying into the market, there has been various ranges of price increase to the minimum of 3% and as high as 20%. And if they are going to taking place accordingly to the market conditions.
If we look at the markets that are operating under direct subsidiary model, we also have to view the timing of a competitor's increase in terms of the price and the timing of their increase. Please understand that it's difficult to provide a guidance there. In terms of the brands, there are a lot of high margin, high ASP brands that are currently at play in the global markets. We plan to increase the number of new products available in the market to further increase profitability and our numbers there. We will gradually withdraw a lot of the low ASP product markets in the market for better performance.
If we look at overall the performance in the overseas subsidiaries, even though we increased the export, price and also the ASP price, despite such price increases, the actual volume of and in terms of revenue have been going up. So we do believe that moving forward, this will be, a good factor in the overall numbers that we see for our revenue forecast.
[Foreign Language]
This is, Wangseop Lim , Chief of NGP, taking your question with regards to the NGP business. So for the NGP market, there are about 70 countries that have such marketing currently in existence, and we have already entered 31 of them. And those 31 countries actually account for 80%, over 80% of the total heat not burn market size. So we have already made entry into the key core markets.
So and, as we have done in 2023 and moving into 2024, our strategy will be to expand further our business in the countries that we already have presence in, to improve and expand our SKU there for better performance. And of course, as I said, the markets that we're currently in account for 80% of the heat not burn market, so there is the remaining markets to be penetrated. So for those remaining countries, we're currently assessing whether there will be new good countries to enter for consideration. And also we're considering looking into making entry into the duty-free channels as well.
The following question will be presented by Yoon-Hye Kim from Morgan Stanley. Please go ahead with your question.
[Foreign Language]
Thank you for the opportunity to ask questions. I have three questions in total. The first one is with regards to the duty-free sales channel. So there has been an increase in terms of portion of revenue coming from the duty-free channel from Q4. And there has been ASP increase in the domestic CC. So if you could provide a little bit more detail into how much the duty-free revenue mix accounts for in the entire volume, please do so. And if you could make a comparison to pre-pandemic levels, how much more room do we have? The second question would be with regards to exports. It was mentioned during the earnings presentation, there were export volume adjustments, controls that were taking effect in Q4.
So could we understand that from starting from Q1 of this year, such adjustments in terms of the volume control have been normalized? The third question is also regarding to the guidance. The guidance is providing that there, the NGP market share increase target for the domestic market is 1%. I think in 2023, there have been also considerable efforts to increase the market share for NGP. So for this year, I guess I'm curious to the extent of what efforts will be put into which area and how much possibility you see for the actual improvement in the market share numbers?
[Foreign Language]
This is Seong-sik Park, the Chief of Marketing, answering the first question. Answering the question with regards to the duty free channel revenue portion and also our outlook in terms of the duty free channel recovery. So if we look at the portion that duty free accounts for in entire revenue, it's 7.7%. And as you well know, the current momentum is definitely we're seeing a recovery trend in terms of the number of international flights and also international travelers. So there definitely does seem to be a recovery at the moment, but we do also have to consider and be mindful of other impacts, such as the FX rate fluctuations and such.
If we compare it against the pre-COVID levels, we would say that the volume, it recovered to about 60% compared to pre-COVID, and also in revenue, about 76%.
[Foreign Language]
I would like to answer the part for KGC. So for KGC, the revenue coming from the duty-free channel is about 7.5% of total revenue. If we look at on a YoY basis, that it did increase by 74%. Pre-COVID level comparison, compared to 2019, the revenue has recovered to about a 50% level, and this year we expect that the overall growth in terms of, on a YoY basis, would be about 30% compared to the previous year.
[Foreign Language]
The questions with regards to the adjustment and export volume, this is Jeong Jo, the Chief of Global Business, answering your question. So we do definitely believe that external growth in terms of revenue and volume is, are definitely important for business operations. But we also believe that for stable business operations, management of our account receivables is also a critical part, and we believe that that part that we considered for, volume adjustment due to such factors will be normalized in Q1.
[Foreign Language]
This is Wangseop Lim , again, for Chief of NGP. So if we look at the year 2023, we would say that it was a year of fierce competition because the competitor released a new product in the market for the first time in five years. So indeed, the competitive landscape was quite fierce, and they had a lot of aggressive promotional efforts in terms of the price for devices, which also was very fierce on the competition front. So if we look at our response, we did launch our lil HYBRID 3.0 ahead of schedule, and we are getting very good response above our expectations currently from the market.
So as a result, we were able to secure the number one position in the year 2023, and in 2024, our major strategies moving forward will be mainly two parts. The first one will be looking at how we could further develop the lil hybrid platform that is growing very well. And in order to do so, we'll take the approach of launching limited devices, also releasing of new sticks, so that we could further strengthen brand competitiveness. And we also think that our key competitiveness compared to our competition is our fresh ideas and also our timely R&D. So for the year 2023, we don't think that after that, in this year, there will be any new product releases that we can expect from the competition at the moment.
So, for our side, our response will be quite timely in trying to provide an upgraded model to the market so that we can secure our competitive edge once again. These will be the main two pillars moving forward so that we could continue to secure the leadership position in the market in the year 2024.