The export route of Korean cigarettes to the Middle East has been reopened, which had been stalled for some time due to unstable regional conditions.
KT&G made an announcement on Feb. 27 that it has signed a contract with Alokozay International, a Middle East tobacco importer, to provide tobacco-type cigarettes worth $1.8 billion (2.2 trillion won) to the Middle East and Central Asian countries.
The size of the contract is the total estimate that will occur during the contract period calculated on the basis of the minimum purchase amount, which is equivalent to half of 2018 consolidated sales. The contract period is seven years and four months until June 2027.
Its exports to the Middle East have plunged over the past two years due to unstable conditions and soaring foreign exchange rates in the region. The contract with Alokozay, in particular, ended at the end of last year, but the delay in renewing the contract caused concern.
The deal means that uncertainties in KT&G's overseas flagship markets have been resolved. It will also be able to secure stable revenue sources for a long period of time and minimize risks in the main market by setting a new minimum purchase quantity clauses annually.
“Through the deal, we expect KT&G to secure continued growth momentum and enhance its corporate value by making the global tobacco business more robust and profitable," a KT&G official said.
With the aim of making a leap forward as a "global big four" company by 2025, KT&G plans to expand the number of countries that it will enter the market from the current 80 to around 100 this year.
