Acquisitions lift volume

Japan Tobacco Inc. reported today that second-quarter domestic cigarette sales, at 20.8 billion, were down by 12.6 percent on those of the second quarter of 2017, 23.8 billion.
At the same time, industry volume was said to have been down by 13.4 percent from 33.8 billion to 39.1 billion.
JT said that its volume and that of the industry had been affected mainly by the expansion of the reduced-risk-product category and a continuing market decline.
The company estimates that sales of reduced-risk products (RRPs) in Japan during the second quarter accounted for about 20 percent of the total tobacco industry volume, a share that was up slightly from that of the first quarter.
During the second quarter of this year, sales of JT’s RRPs amounted to 0.5 billion cigarette equivalent units. ‘Based on sales volume, our share within the RRP category in the quarter was estimated at approximately 10 percent in convenience stores where our product was available,’ JT said in announcing its results for the second quarter and first half. ‘Ploom TECH’s nationwide roll-out started in June and expanded to convenience stores in July.’
JT’s market share during the second quarter, at 61.6 percent, was said to have been 0.6 of a percentage point higher than during the second quarter of 2017 and 0.2 of a percentage point higher than it was during the first quarter of this year.
Core revenue for the domestic tobacco business fell by 5.1 per cent to ¥142.9 billion and adjusted operating profit was down by 13.1 percent to ¥54.6 billion.
Meanwhile, Japan Tobacco International’s total shipment volume during the second quarter, at 107.3 billion, was increased by 5.6 percent on that of the second quarter of 2017, 101.5 billion.
At the same time, JTI’s Global Flagship Brand (GFB) shipment volume was increased by 0.8 percent to 68.1 billion.
JT reported that JTI’s volume growth had been driven by acquisitions in Ethiopia, Indonesia and the Philippines. ‘Excluding acquisitions and unfavorable inventory adjustments, total shipment volume declined 0.5 percent,’ the company said.  ‘Quarterly volume increases and market share gains in Austria, Czech Republic, Germany, Hungary, Iran, the Netherlands, Poland, Switzerland and several emerging markets did not offset the impact of industry volume contraction, notably in France, Russia and Taiwan. GFB shipment volume increased 0.8 percent, growing in North and Central Europe and Rest-of-the-World, driven by Winston.’
JTI’s core revenue increased by 8.0 percent to ¥325.2 billion, while adjusted operating profit rose by 14.4 percent to ¥103.2 billion.
“Our first half results demonstrate a solid performance and we remain on track to achieve our consolidated full year profit target,” said Masamichi Terabatake, president and CEO of the JT Group.
“The international tobacco business delivered strong profit growth, led by pricing in key markets.
“We are confident about reaching our full year profit target as we expect our positive performance to continue into the second half.
“The acquisition of Donskoy Tabak companies will reinforce our No.1 position in Russia, a long-term key market for the Group’s earnings growth.
“In the Japanese domestic tobacco business, cigarette market share gains continued led by the robust performance of MEVIUS.
“Our RRP sales volume and revenue grew following an encouraging start of Ploom TECH’s nationwide roll-out while our capsule manufacturing capacity has continued to improve as planned. Although the current growth of the RRP market is slowing down, we believe that its market share could expand to 30 percent by 2020 driven by industry-wide innovations, an area in which we have also been making progress. To this effect, we are accelerating our investments in RRP initiatives, especially behind Ploom TECH, our unique offering, to establish the low-temperature heating category.”