KT&G Corporation (A033780) Earnings Call Transcript & Summary

[Interpreted] Ladies and gentlemen, I am Kate Park, Head of Investor Relations at KT&G. Thank you for attending KT&G's 2025 First Quarter Earnings Report. 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 KT&G management team in attendance today. With us today, we have Mr. Sang-Hak Lee, Chief Finance and Operating Officer; Mr. Chang Gu Huh, Chief Strategy Officer; [ Mr. Jae-Young Cho ] Chief of Global Business; Mr. Young-Chan Yoon, Chief of Marketing; Mr. [indiscernible] Chief of NGP Business, Real Estate Business; Mr. Yong Beom Kim, Head of Finance Office; Mr [indiscernible], Chief of Marketing and KGC; and [ Mr. Yang Jin Kim ] Chief of Global Business 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 and any forward-looking information discussed in the call today may differ from the actual results to be reported in the future. We will begin with key items from our consolidated earnings and then move on to each business. Presentation will be followed by a Q&A session along with the management team. I'll first invite Mr. Sang-Hak Lee, our COO, to share with you our first quarter consolidated results and key business updates.

Ladies and gentlemen, Sang-Hak Lee, COO and CFO of KT&G. I extend my gratitude to all our shareholders and investors for the support and interest you have shown for KT&G. In the first quarter of 2025, KT&G delivered double-digit growth in both revenue and operating profit, mainly driven by the Global CC business that reached record high revenue for a quarter. Especially after adjusting for one-off costs, including early retirement packages, our adjusted operating profit showed exponential growth of 45.1%. Global CC, we managed to accelerate the growth trifecta of volume, revenue and operating profit in the business, a growth that has been sustained for 4 consecutive quarters. While volumes grew in key markets, aggressive pricing and improved product mix also drove ASP, leading to growth of 23.3% in volume, 53.9% in revenue and 312.5% in operating profit. Meanwhile, in March, KGC launched a new system of co-CEOs for the domestic and overseas businesses, respectively, to tailor the business structure to the market. Under the new system, we will enhance profitability via channel and product reorg domestically while fostering localized brands and accelerating key channel expansion overseas. Moreover, as announced by the CEO during the AGM in March, the company is attempting to break away from its stick-centered business to secure future growth momentum from modern products as we engage in diverse business strategies. Through partnerships with industry peers, development of independent products while seeking opportunities for inorganic growth, we will roll out nicotine pouches and e-vapor type products to enforce a multi-category strategy in the near future. If and when we have any updates on this, our CEO will transparently communicate with the market on the topic. We expect 2025 to be a year of extremely high uncertainty and risk. Nevertheless, KT&G will not waver in our efforts for change and innovation as we attempt to secure future growth momentums based on strong core competitiveness to ultimately enhance shareholder and corporate value. I ask for your continued support going forward. Thank you. Before we go into the details of our first quarter results, I have a quick announcement on KT&G's plans for Investor Relations activities going forward. We intend to strengthen our transparency and consistency in our communications with the market and solidify our relationship based on trust. To that end, we will be expanding IR activities led by the CEO. In line with this, our annual earnings release will be presented by the CEO, where he will update you on the key management activities and earnings highlights as well as participate in the Q&A session to engage in active and truthful communication with our shareholders and investors. Also, as our CEO has mentioned, key updates on the company's business or strategy, including expanding to modern products for future growth momentum or the KT&G Plus Alpha Program will be directly communicated by the CEO under special announcement. With such efforts, we wish to build trust with the market and strengthen management activities to enhance shareholder value. And I ask for unwavering support from our shareholders and investors. With that, we will move on to our Q1 results in Page 4. Q1 consolidated revenue was supported by exponential growth in Global CC to rise 15.4% year-on-year to KRW 1.4911 trillion. Q1 consolidated operating profit was driven by stronger volumes in Global CC combined with higher ASP that led to improved profitability, delivering a 20.7% growth to KRW 285.6 billion. In particular, after adjusting for one-off wage-related costs, the adjusted operating profit was up 45.1% to KRW 343.2 billion. As for net income, currency fluctuations within the quarter led to lower currency-related nonoperating profits, driving income down by 9.7% to KRW 257.9 billion. This led to a 4.7% reduction in EPS to KRW 2,371. EBITDA rose by 19.1% to KRW 354.3 billion. EBITDA margins at 23.8%. Next to Page 5 on reasons behind movement in earnings. In the tobacco business, cost variance, including COGS due to higher volumes and one-off costs had a negative KRW 115.5 billion impact, but improved product mix with more high ASP products and pricing was a plus KRW 67.2 billion. Stronger volumes led by Global CC was KRW 56.8 billion and appreciation of the dollar against the won added KRW 37.8 billion, amounting to a total of plus KRW 46.3 billion in profits from the tobacco business. The HFF business had higher SG&A, including advertisement costs, driving down profits by KRW 4.8 billion. The real estate business also added KRW 7.8 billion in profit, supported by higher income recognized from small- and medium-sized development products. All in all, consolidated operating profits were up 20.7% Y-o-Y. After adjusting for one-off wage-related cost of KRW 57.6 billion, adjusted operating profit rose by 45.1%. Moving on to the business segments in Page 6. First, on the tobacco business. Tobacco revenue for the quarter was supported by Global CC that again broke the record on quarter revenue to rise 15.3% to KRW 988 billion. Dramatic improvements in global cigarette profitability drove up Q1 operating profit as well as margins. Meanwhile, share of global sales in tobacco for the quarter rose by 3.6 percentage points to 63.1% with strong Global CC sales. Let us go into each segment of the tobacco business in Page 7. Starting with domestic CC. The domestic CC market volume for Q1 was impacted by higher numbers of cold days and holidays to show a steeper decline than usual of 8%. However, as we launched new products meeting consumer needs to increase our market share, while at the same time, increased sales in duty-free to enhance ASP, the fall in revenue was mitigated. Next to Page 8 on Global Sales. As mentioned, Global CC revenue reached an all-time quarter high as export and subsidiary businesses flourished. Revenue reached an all-time quarter high as well as volume and revenue grew in parallel. And on a Y-o-Y basis, 53.9% growth. Moving on to Page 9 with NGP. In Q1 NGP revenue, the device supply disruption caused a temporary delay in device procurement impacting the domestic and global revenue. In turn, NGP revenue was down Y-o-Y to KRW 159 billion. Let's go deeper into domestic and global NGP numbers on Page 10. Domestically, competitors continue to launch new products and engaged in aggressive marketing, bringing more attention to the HNB category with market penetration of 1.8 percentage points to 23.2%, accelerating the expansion of the category. Despite such intensified competition and unfavorable environment like the supply disruption, we launched new stick products to maintain market leadership. In the global market, the impact of the supply disruption as well as existing devices becoming outdated, we have observed a delay in new demand creation for overseas sticks. Next is Page 11 with HFF. With the domestic Lunar New Year promotion and high revenue in key global markets, Q1 HFF revenue climbed by 1.9% to KRW 314.4 billion. In operating profit, while the global business showed continuous improvement in profitability as we executed marketing investments to revitalize domestic demand for the future, profit for the entire business was down 21% to KRW 18.2 billion. For global revenue shares, with stronger sales from overseas, the figure rose by 0.9 percentage points to 21.4%. Breaking down domestic and overseas performance in Page 12. Looking at revenue by channel and domestic business, large channels like department stores and supermarkets delivered lower revenue as we restructure operations and product portfolio more towards profitability. However, newly launched brands, including Gidarim and GL-Pro grew in sales and the Lunar New Year holiday gift demands drove the growth of stand-alone channel revenue and fostering of strategic channels via line extensions for online-only products and boosting advertisement efforts led to higher e-biz revenue, adding to a slight increase in domestic revenue. Global revenue was supported by strong Chinese Spring Festival sales and execution of new partnerships in the U.S. to rise by 8.8% to KRW 67.4 billion. Lastly, on Page 13 with Real Estate. For the Real Estate business, as we recognize more revenue with construction progress in small and midsized development projects, including Anyang, Mia and East-Daejeon business revenue grew Y-o-Y to KRW 100.4 billion. Operating profit for the quarter rose for the same reasons to reach KRW 10.4 billion higher than the previous year. With that, we conclude our presentation for KT&G 2025 first quarter results. We are now happy to take your questions.

[Operator Instructions] [Interpreted] The first question will be provided by Jung Wook Kim from Meritz Securities.

[Interpreted] I have 4 questions in total. The first being in terms of the NGP, if you could provide some guidance on the new platform, that would be appreciated. And there are some supply chain issues. So if you could provide an outlook for the sticks and the timing for the turnaround. The second question is regarding the Red Ginseng segment of the business. Last year, the performance was not that favorable. And of course, if we consider still the base effect, we're not really seeing good growth in terms of revenue and also on the profitability side because of the increased cost burden. Right now, we did change the leadership structure to a representative CEO per region. So with that change, could you give us a timing expectation in terms of the turnaround? The third question is with regards to the strategy in terms of pricing. There has been a price increase from a competitor recently. So what is the company's response strategy? And are there any expected spillover benefits as a result? Also, if you expect and have any possibility or outlook for the tobacco tax increase after the presidential election, that would be appreciated as well. The fourth question is regarding cost-related issues. There has been a lot of efforts to reduce costs. And even if we do consider that there are one-off expenses to be considered, there still seems to be a lingering impact of cost burden. How long should we expect this to persist? Would it be alleviated in Q2 and moving on to the second half? And if we consider the early retirement impact on the cost side from Q2 and moving forward, how much of the impact from the cost savings would we be able to see in the numbers?

Yes. I am [indiscernible] Chief of NGP, and I will be answering the first question. So thank you for the question. I would like to probably summarize the question into 4 main points in my answer. The first regarding the new platform launch plan. Second, I think you're also curious about the Vietnam-related exposure and issues and also the turnaround timing as based on our expectation. So first, in terms of new platform launch plan. So for the domestic NGP, we do believe that the market is a mature market now. So rather than taking the direction of launching new platforms into the market, we will be focusing on upgrading the current platforms that are already released in the market. So we will, in terms of the exact timing and the release of the products and such, not be able to disclose that information specifically here, so we ask for your kind understanding on that. But we have already carried out customer surveys to study the pain points of the current platform. And based on that, we are going to upgrade the current platforms that are existing for the domestic business. For the overseas global business, we are currently doing the preparations for the [ PM ] new platform launches. Also in terms of the exact timing, we cannot specify as of now, but the exact -- not the exact timing, but in terms of a rough estimation, you can expect the end of this year or maybe early next year as a possible time line. In terms of the Vietnam production-related issues, already, the transfer of the facilities for 2 out of 3 have been completed, and they have resumed production. And for the remaining one, we have also identified the possible candidate allocation, and we expect to resume production soon. So we don't expect any additional future-related issues to occur moving forward. In terms of the turnaround timing, so obviously, in Q1, there were some unexpected events that drove us to have a less than favorable performance. We do believe though that in terms of the overall volume and the volume to be expected from the global business, we have more of an agree upon consensus. So we are quite confident in terms of the revenue and both the operating profit, we will be able to reach levels as similar as last year. And to answer the second question in terms of the expected timing for turnaround of the Health Functional Food. So as we mentioned, in terms of the strategic direction and the structural changes, we have representative CEOs for each region responsible for each market, and we have a turnaround timing and strategy based on that structure. So first, if we take a look at the domestic HFF market, it is experiencing a negative growth due to the economic downturn and weakened consumer sentiment. In response to that, we are currently restructuring low-profit SKUs and inefficient business areas and making a transition toward a profit center model to improve our business fundamentals. And at the same time, we are strengthening external partnerships and also enhancing CRM-based targeted marketing to expand our customer touch points. For the overseas business, we are currently refining country-specific distribution networks and expanding sales of strategic brands and also building up locally integrated business models. And these efforts are aimed to not only drive top line growth, but also improve profitability as well. Through such structural improvements and global expansion efforts, we are currently laying the foundation for a rebound of performance within this year, and we expect to achieve a full-scale turnaround in 2025.

Yes. For the next question, I will answer the question. I am Young-Chan Yoon, Chief of Marketing. If we look at the overall market for CC in Korea, we would say in terms of the price point, over 80% of the products are priced in the range of KRW 4,500, reflecting extremely high price sensitivity. This significantly limits the effectiveness of differentiated pricing strategy for our existing products. Therefore, the company has focused on increasing the share of high-priced products through premium new launches rather than raising prices on existing SKUs, and this will continue to be the strategy moving forward. In terms of the expectation of political uncertainties and price increases, we would say due to ongoing political uncertainties, there are currently no active discussions at the government or the national assembly level regarding tobacco tax increases. So it makes us difficult for the company's perspective to predict the potential changes. However, the company will continue to closely monitor the developments in the government, also the national assembly, the industry and the academic circles and pursue strategies based on various anticipated scenarios to further strengthen the profitability in the domestic tobacco business.

The next question, I will be answering. I am Chief of Finance for KT&G. So in terms of the overall impact of the one-off expenses to be expected from early retirement and such programs, that was KRW 57.6 billion, and that has been reflected in the cost for this current quarter. And in terms of resource-related costs, also, there is expectation based on the current restructuring that in the midterm, that would lead to a cost saving impact in the midterm for about KRW 64 billion. And we do believe that the key highlight in this development is that the restructuring and optimization of human resources will be able to lay the foundation for us to secure investment for future important strategic directions and areas moving forward. And in terms of the cost adjustment and burden moving forward, we are seeing more of a stabilized trend in terms of the increase of tobacco leaf prices as of now. And we are expecting the NTM side to also stabilize and maintain quite steady. And if we do also count in the factor that the Korea won to dollar U.S. dollar exchange rate will stabilize, the overall cost burden moving forward is expected to normalize and be more steady moving forward. Based on such efforts and the overall direction for the cost burden, we are going to continue to also have a lot of efficiency and improvement in the production efficiency, and we will continue to have a positive impact from our cost reduction efforts and relieve the cost burden moving forward.

[Interpreted] The following question will be presented by Eunji Kang from Korea Investment & Securities.

[Interpreted] This is Eunji Kang from Korea Investment Securities. I have 3 questions in total. For -- if we look at the performance this quarter, for Global CC, the performance was quite impressive. Are there additional upsides to be expected and continued growth in terms of performance in both volume and pricing moving forward? What is the company's strategic direction? Secondly, in terms of the liquidization plan for real estate-related assets, if you could provide some updates there? And if there are any updates to the treasury share buyback and cancellation plans, please update us on that as well. And thirdly, there are a lot of fluctuations and volatility in the FX rates recently. So if you could give us an idea in terms of how much that would have an impact on the overall cost and the FX-related gain and loss.

[Interpreted] Yes. To answer the first question, this is Chief of Global Business, Jae-Young. If we look at the overall strategic direction, we would say the direction for the company is to further strengthen the portfolio and also continue to have targeted marketing and the strategic direction that is right for each specific region and market. If we look at the additional points for additional price increases, we would say that there is the overall trend of an increase in terms of export price for the products that are exported and a lot of the ASP increase factors for the more mid- to high-priced products is going to be possible as well. So based on that, we do believe that the overall growth trend in terms of both the revenue and the operating profit would be sustainable moving forward. In terms of additional upside, we would say that in order to secure this, the strategic direction would be to further penetrate and enter new markets and also expand our footprint in direct sales. so that we can have qualitative growth, both in terms of volume and profit. In terms of our pricing strategy, we would say that we are looking at how we could further adjust the right pricing strategies into the market so that we could have this further strengthen the portfolio that we have to have competitiveness in the global markets. We will continue to focus on the strengthening of our portfolio and also tailor marketing in order to make the sustainable growth of the Global CC business.

This is COO, Sang-Hak Lee that will be answering the question. I think there are 2 questions in total, additional liquidization plan of the assets and also the shareholder return plan. So if we take a look at the asset sell-off, so we did identify the potential assets for sale until 2027, and we have already sold 28 throughout 2024. Through such sales, we were able to secure cash of roughly around KRW 160 billion. And last year, we used that to have a treasury share buyback and cancellation. And I think this is a point that we could reiterate once again that was executed. In terms of this year's plan, we would say we will continue to pursue the sell-off of our noncore assets, such as the lease buildings, commercial properties and also the regional sales offices, and that will continue to be the direction this year as well. So again, reconfirm this point. And if we look at the overall impact from that, of course, the additional cash that we are able to generate from such activities will be used for additional shareholder return-related policies. And in order to share a little bit more in terms of our shareholder return and the value enhancement plans that we have. So for 2025, we will continue to carry out the shareholder return policy continuously. And these would include interim dividend payments and also additional treasury share buyback and cancellation programs and also the Plus Alpha program that we will additionally be using some of the proceeds that we get from the real estate sell-off to be used for shareholder return as well. So again, the direction would be to continuously pursue the shareholder return policy this year as well. And if there are any decisions made at the Board of Directors level, we will promptly communicate that to the market without any delay.

Yes. And to answer the next question, this is Head of the Finance Office, again, Yong Beom Kim. I will talk about the FX-related cost burden due to the currency fluctuations and the impact on the gain and loss of FX-related gain and loss. So in terms of the impact, it is estimated from the company's standpoint, a fluctuation of KRW 10 in the Korean won against the U.S. dollar exchange rate affects KT&G's annual operating profit by approximately KRW 5.4 billion. And the foreign currency translation FX gain and loss is impacted by around KRW 14.9 billion. The recent high U.S. dollar and Korean won exchange rate has had some impact on the procurement cost of the imported tobacco lease for the company. However, the increased export performance has more than offset the cost burden caused by the exchange rate rise. Additionally, since there is approximately a 1-year time lag before the higher tobacco leaf purchase prices are reflected into our actual manufacturing costs, the numbers that you're seeing in the current quarter did not reflect a real cost increase due to the exchange rate hikes at the moment.

[Interpreted] The following question will be presented by Yu-jung Han from Hanwha Investment & Securities.

[Interpreted] This is Yu-jung Han from Hanwha Investment & Securities. I have 4 questions in total. In terms of the perception of the modern new products, I think there would be different levels of perception and awareness from the consumer level. So if you could provide us some insight into how you're trying to look at such markets in terms of differentiating the products and also positioning the products into the markets that are rarely and looking at this as a new opportunity. And secondly, there was also a lot of mention in terms of the health functional food, the different businesses such as cosmetics and the non-Red Ginseng and the diversification direction. So if you could provide some updates and a little bit more insight into what changes are expected, that would be appreciated. The third question is just a simple fact check. You did mention that the expected cost reduction on the labor side is expected to be around roughly KRW 64 billion. Would that be on an annual basis, cost savings? Just please confirm that. And the fourth question is with regards to the Global CC strategy. You did mention that there is going to be expansion of direct sales. So what does that actually mean from the company's perspective? If you could elaborate on that, please?

To answer the first question, this is Chief of NGP, [indiscernible]. So you asked about -- just to summarize your question again. So you asked about how the company is going to respond to the markets in the Asian market normally that is not really used to this concept of modern product. And I think when we say modern product, we can define that currently as product type nicotine pouches, for example. I think if we look at for nicotine pouches, the company does believe that there is very high growth potential and possibility for growth in this segment because if we currently look at the different types of cigarettes that are offered in the market, we think that there is growth potential if it does have very much clear and tangible benefits and appeal to the customers. So for example, for the nicotine pouches, there are no smokes that are combusted out of the cigarettes when used. So it's possible to utilize according to TPO. And it is possible to also have a stick in cases that it's not really suitable for smoking a cigarette, which is, again, a very clear benefit that will be offered from the product. As of now, the market is currently limited to mostly what we're seeing in the United States and Northern Europe, but we do believe that there is very growth potential -- good growth potential for this product, and we are making a lot of preparations on different fronts to be able to respond to the market growth accordingly. So for example, the options that we could consider would be direct development and also potentially M&A and additional joint development with the partners that we have current partnerships with. So we are going to utilize all the options that we have available to have a prompt and swift response to the market so that we are able to respond to the demand in the market growing accordingly.

To answer the next question, this is Chief of Marketing at KGC, Young-Chan Yoon. And I understand the question to be for the HFF business, the status of the global business and also the business diversification regarding cosmetics and the non-Ginseng business and the strategic direction moving forward. So if we look at the overall strategy that we have for our overseas global market, we are currently focusing on expanding the distribution coverage and also providing tailored local products that are targeting the right specific markets accordingly. So we are trying to look at how we can have differentiated marketing strategies that are mainly tailored to the United States and China for the expansion of our health functional food products. And we are looking at how we could have further strategic partnerships and the development of [ Hagisan ] which is a product we have with a proven price and product competitiveness, and we are supporting a lot of the research there. And we will continue to expand our global sales through such growth and competitive advantage and levering such strength. And we also planned in terms of the other businesses like cosmetics and you mentioned before, to have the new business portfolio grow through the inorganic expansion of raw material B2B operations and the non-Red Ginseng health functional foods. By leveraging the current assets that we have for [indiscernible] we will currently try to have a broadening of our business model across the entire value chain and pursue strategic partnerships with successful brands from an open and collaborative perspective. And lastly, if we look at the overall growth for the restructuring moving forward, we plan to have accelerated profit center growth by swiftly restructuring inefficient businesses and low-margin products. This would include the prompt phasing out of underperforming channels such as cafés and spas and also certain cosmetics line and immediate discontinuation of products that do not contribute to profit improvement.

Yes. And this is Head of Finance Office, Yong Beom Kim to speak about the clarification factor question. So we did mention that it is expected that we will have a cost saving impact roughly around KRW 64 billion. And we recognize as a one-off expense this quarter that amounts to KRW 57.6 billion. The total savings of cost that we expect to have in the future is to the size of KRW 120 billion, and it could be more than that. And the period that we expect for the total cost savings to have an impact and materialize fully is roughly around 5 years. And we do expect that the breakeven point will be able to reach in the first half of 2027.

And this is the Chief of the Global Business, Jae-Young. I want to take the next question. You asked about the meaning of expanding direct sales. We would say that the meaning of direct sales for the company would be to have a tailored and customized approach that is targeting each specific market and region. So if we look at the Asia Pacific market, we will focus on the strengthening of strategic brands and also having the right tailored customized product positioning and launches into the market to further strengthen competitiveness. If we look at the overall cases for the additional markets, we will continue to have additional strengthening of the products that continue to have good marketing capabilities and strengthen such efforts to be able to further strengthen our product competitiveness. And we will look at also Eurasia and CIS. And for this market and region, we would say the plan and the direction moving forward would be to have further segmentation of exactly where the high profit products are and look at how we could have a very good differentiation and segmentation of the high growth yielding products so that we could have and drive maximum profitability.

[Interpreted] The following question will be presented by Sang-Jun Park from Kiwoom Securities.

[Interpreted] I have 2 questions in total. The first question being, so if we look at the overall performance for Q1, on a consolidated basis, there was a Y-o-Y growth of 15% for the revenue and 20% for the operating profit. Are there any updates to the 2025 guidance? If there are some, please provide them. The second question is regarding the completed construction of the Kazakhstan plant. I understand that it was completed in the month of April. So if you could provide some more details in terms of the mass production schedule since the completion. And also, if you could provide some additional information in terms of whether the role of this Kazakhstan plant will be to take on the volume from previous countries or if it will be targeting specific new volume and regions? And if it is planning to take on new regions and volumes, if you could give us an idea into more specifics of where that is, that would be appreciated.

This is Chang Gu Huh, Chief of Strategy and Planning, and I'll be taking the first question. So with regards to the current situation, if we look at the current performance and earnings of the company and also the market landscape, there are no changes to the annual guidance as previously introduced because we do believe that we are on track to be able to achieve the previously communicated numbers. We will be taking into consideration our performance in Q2 and also the changes to the market environment globally and domestically to make any upward revisions if necessary after review from the company's perspective. If there are any changes or revisions that are made, we will promptly communicate that with the capital markets for full transparency.

And to take the last question, this is COO, Sang-Hak Lee, to answer the question asked in terms of the Kazakhstan plant plans moving forward. So with regards to the operational plans for the Kazakhstan plant, we have completed the construction of the Kazakhstan plant, and that was for the purpose of securing stability of supply and distribution of the CIS region and also strengthen cost competitiveness. We have already started commercial mass production, and this is being supplied to some markets in Russia and Uzbekistan. We do believe that currently, it is in the initial stages of utilization and operation. So it is still in the initial stages. However, it is going to have lesser cost in terms of the manufacturing cost and the logistics cost compared to domestic production. So there is going to be a cost reduction impact from there. And we are also looking at how there could be a tariff-related impact depending on the different regions for the future operations of the plant. If we look at the future contribution coming from the Kazakhstan plant, we would say that as this operation becomes more stabilized and the yield improves, there will be increased contribution coming from the Kazakhstan plant. And we would say that we are currently looking at how we could improve the distribution networks in the different regions so that we are able to offset a lot of the depreciation expenses that we have for the required CapEx. Lastly, if we look at, for example, the FTA, current negotiations that could potentially be signed with the Eurasian countries, we have to be mindful of the impacts there. So we're very much closely monitoring the situation. And if there are any tariff-related impacts to be expected, we will also be looking at how we could further diversify our export strategy and basis to effectively respond to the related changes and impacts there. So if there are no further questions, we will now wrap up the 2025 Q1 earnings conference call. We do expect that there will be continuous interest and support for our company moving forward, and we wish you all the best in the endeavors that you carry out, and we hope to meet you again soon. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]