Author: Staff Writer

  • RJR Remains Liable for Litigation Payments

    RJR Remains Liable for Litigation Payments

    A Florida state appeals court ruled that R.J. Reynolds (RJR) owes the state $100 million from a 1997 settlement.

    RJR argues that it should not have to make payments for the Salem, Winston, Kool and Maverick brands as RJR sold those brands to ITG Brands in 2015.

    “We find, simply put, that a contract is a contract and that Reynolds continues to be liable under the contract it signed with the state of Florida,” said the court’s decision, written by Chief Judge Spencer Levine.

    “The FSA (Florida Settlement Agreement) required that Reynolds make annual payments to the state of Florida in perpetuity, with no condition of termination, in exchange for the release of liability for past and future medical costs incurred by the state of Florida,” Levine wrote.

  • Juul Appoints New Board Members

    Juul Appoints New Board Members

    Juul Labs CEO K.C. Crosthwaite will also become chairman of the company’s board, succeeding co-founder Adam Bowen, reports Bloomerg. Bowen, who became Juul’s first chairman when Crosthwaite joined the company last fall, will head up the product committee.

    Juul also appointed Teresa Sebastian, an executive with financial and compliance expertise, to join its board as the company seeks to reset its business and diversify its ranks.

    Sebastian is the first black member of the company’s eight-person board. In May, Juul added former Canadian Health Minister Rona Ambrose as an independent director, making her its first female board member.

    The changes come at a pivotal moment for Juul, with corporations under pressure to promote diverse voices and Juul trying to shore up its finances and win regulators’ permission to keep selling its e-cigarettes in the U.S.

    “We are all aware that our company is entering a critical period,” Bloomberg quoted Crosthwaite as saying. “With the support and oversight of our increasingly robust board, we will deliver our first PMTA submissions to the FDA, while continuing the work of combating underage vaping and transitioning adult smokers all around the world from combustible cigarettes.”

    Applications with the Food and Drug Administration are due Sept. 9.

  • WHO Remains Skeptical About Heating Products

    WHO Remains Skeptical About Heating Products

    Photo: Tobacco Reporter archive

    The World Health Organization (WHO) has reminded its member states of their tobacco obligations under the Framework Convention of Tobacco Control (FCTC) in relation to heat-not-burn products (HNB).

    “Heated tobacco products are tobacco products, meaning that the WHO FCTC fully applies to these products. [Rules] obliges Parties, to prohibit ‘all forms of tobacco advertising, promotion and sponsorship that promote a tobacco product by any means that are false, misleading or deceptive or likely to create an erroneous impression about its characteristics, health effects, hazards or emissions,” the health body wrote in a statement.

    The WHO claims that reducing exposure to harmful chemicals in HNB products does not render them harmless, nor does it translate to reduced risk to human health. “Indeed, some toxins are present at higher levels in [HNB] aerosols than in conventional cigarette smoke, and there are some additional toxins present in [HNB] aerosols that are not present in conventional cigarette smoke,” the WHO wrote. The organization also claims that the health implications of exposure to HNB products are unknown.

    The WHO statement comes after the U.S. Food and Drug Administration (FDA) authorized Philip Morris International to make a modified exposure claim about its IQOS HNB device in the United States.

    The WHO says there is no proof that HNB products are safer than cigarettes. “Given that health may be affected by exposure to additional toxins when using [HNB], claims that [HNB] products reduce exposure to harmful chemicals relative to conventional cigarettes may be misleading.

    “Moreover, the relevant orders grant a temporary market authorization within the U.S. and are based on factors specific to the US, which is not a Party to the WHO Framework Convention on Tobacco Control.”

  • Altria Reestablishes 2020 EPS Guidance

    Altria Reestablishes 2020 EPS Guidance

    Photo: Altria

    Altria Group announced its 2020 second-quarter and first-half business results and reestablished 2020 adjusted diluted earnings per share (EPS) guidance. It also announced an increase in its quarterly dividend ahead of its previously scheduled dividend declaration date.

    Net revenues were down 3.8 percent to about $6.4 million from the second quarter of 2019.

    “Over the first half of 2020, we believe Altria showed resilience in volatile market conditions, growing adjusted diluted earnings per share by 8.5 percent, driven by the outstanding financial performance of our core tobacco businesses,” said Billy Gifford, Altria’s CEO. “We’ve also hit key milestones and made steady progress behind our noncombustible product portfolio.”

    “With a better understanding of Covid-19 impacts on adult tobacco consumer purchasing behavior and an additional quarter of ABI earnings contributions, we’re reestablishing full-year 2020 adjusted diluted EPS guidance.”

    Altria expects its 2020 full-year adjusted diluted EPS to be in a range of $4.21 to $4.38, representing a growth rate of 0 percent to 4 percent from an adjusted diluted EPS base of $4.21 in 2019.

    “We’re pleased to announce that yesterday, our board declared a quarterly dividend of $0.86 per share, representing a new annualized dividend rate of $3.44 per share and an increase of 2.4 percent from the previous annualized rate of $3.36 per share,” said Sal Mancuso, Altria’s chief financial officer. “This dividend increase marks the 55th dividend increase in the past 51 years.”

    To date, Altria recorded net pre-tax charges of $50 million, directly related to costs for disruptions caused by, or efforts to mitigate the impact of, the Covid-19 pandemic. These pre-tax charges included premium pay, personal protective equipment and health screenings, partially offset by certain employment tax credits.

    Altria said its tobacco businesses have not experienced any material adverse effects associated with governmental actions to restrict consumer movement or business operations but continue to monitor these factors. Most retail stores in which their products are sold, including convenience stores, have been deemed to be essential businesses by authorities and remain open.

  • Sales and Profit up at Turning Point Brands

    Sales and Profit up at Turning Point Brands

    Photo: Tobacco Reporter archive

    Turning Point Brands (TPB) announced its second-quarter results and increased its 2020 guidance.

    Net sales increased 12.5 percent to $105 million, and gross profit increased 16.8 percent to $48.1 million. Net income decreased $4 million to $9.2 million, reflecting the inclusion of expensing premarket tobacco product application (PMTA) costs incurred during the current quarter compared to the net gain related to a settlement from the V2 winddown in the previous year’s quarter. Adjusted EBITDA increased 24.8 percent to $22.8 million.

    Absent any further acquisitions, the company projects 2020 net sales to be $370 million to $382 million (up from previous guidance of $338 million to $353 million). It projects 2020 adjusted EBITDA of $78 million to $83 million (up from previous guidance of $69 million to $75 million). Its projections assume no upside from the PMTA process in 2020.

  • KT&G Aims for No. 4 Position

    KT&G Aims for No. 4 Position

    Photo: KT&G

    KT&G has stated that by 2025, it aims to become the fourth largest tobacco company in the world.

    “KT&G aims to increase the number of exporting countries from 80 to over 200 by 2025,” the company said in a statement. “Through this, we set the new goal of becoming the No. 4 tobacco company in the global market by then.”

    KT&G was the No. 5 tobacco maker in the world by sales volume and market share in 2016, according to Euromonitor International. To reach its No. 4 goal, the company has been exploring new markets and plans to increase investments in its global subsidiaries’ distribution network and marketing infrastructure.

    KT&G’s global ambitions were also highlighted in Tobacco Reporter‘s July 2020 issue.

  • Push for Harsher Smuggling Penalties

    Push for Harsher Smuggling Penalties

    Photo: Džoko Stach from Pixabay

    Senators in the Philippines are pushing for harsher penalties for smuggling tobacco products, including making the offenses nonbailable and worthy of a life sentence in jail.
     
    Currently, there is a PHP50 million ($1 million) minimum fine and eight years to 12 years of possible jail time for illegal trade.
     
    The senators have stated that cigarette smuggling is weakening the campaign to reduce smoking as illicit tobacco products are both cheaper and more dangerous. “There must be a strong crackdown on smuggling and illicit trade of tobacco products,” said Senate President Pro Tempore Ralph Recto.
     
    “Smuggling hurts local industries and costs jobs,” said Senator Sonny Angara. “If it [smuggled value] exceeds PHP50 million, it can even be considered economic sabotage under a previous law.”
     
    The proposed harsher penalties for illicit trade “should be coupled with a strong and consistent enforcement,” according to Senate Minority Leader Franklin Drilon.

  • BAT: Illicit Traders Have Taken Over South Africa

    BAT: Illicit Traders Have Taken Over South Africa

    Photo: BAT

    British American Tobacco South Africa (BATSA) declared today that the entire domestic cigarette market is now controlled by illicit suppliers. BATSA added that the nation’s lockdown of legal cigarette sales during the Covid-19 pandemic has cost the country ZAR4 billion ($241.7 million) in lost excise tax revenues and 30,000 industry jobs lost.

    “With an already overstretched consumer, further increasing the cost of tobacco products will simply mean they default to the illicit market, which is now significantly cash-flush and can now afford to significantly reduce their prices,” said BATSA spokesperson Johnny Moloto.

    “This means that tax-compliant manufacturers like ourselves continue to be at a disadvantage while the state is losing around ZAR35 million [$2.1 million] every single day in excise taxes.”

    Moloto added, “These illicit supply chains will be so entrenched that it will be difficult for SARS (South African Revenue Service] to be able to reverse this or deal with this within a short period of time.”

  • Vietnam Struggling With Smuggling

    Vietnam Struggling With Smuggling

    Photo: Tobacco Reporter archive

    Vietnam loses VND8.5 trillion ($366.4 million) in tax revenue each year to tobacco smuggling, according to a recent article in Vietnam News.

    Tobacco use among those in Vietnam is more than 45 percent, with a constant increase in young people taking up smoking. Vietnam is one of 15 countries with the highest rate of smokers, according to the World Health Organization. Tobacco-smuggling brings high profits, according to Nguyen Mahn Hung, chairman of the Vietnam Consumer Protection Association.

    “Smuggling can bring profits of up to 400 percent while official imported cigarettes are subject to import tax of between 100 percent and 202.5 percent and value added tax of 10 percent,” he said. Vietnam is third in the region for illegal tobacco trading, with 21 billion sticks of illegal tobacco products. 

    In related news, Health experts and anti-smoking advocates met at a conference by the Ministry of Information and Communications in Ho Chi Minh City, on July 23 to express their concerns about the rising incidence rates of vapor and heat-not-burn (HNB) tobacco products among youth.

    Phan Thi Hai, deputy director of the Vietnam Tobacco Control Fund under the country’s Ministry of Health, noted that while his ministry has worked hard to decrease cigarette consumption in recent years, it has been outflanked by the large rise in vapor and HNB tobacco product users.

    Hai said that the makers of these products use “compact, eye-catching designs and various flavors” to entice new users, whether they are smokers or nonsmokers.

    Le Thi Thu from HealthBridge Canada urged the Vietnam government to develop a legal framework to control vapor and HNB tobacco products with authorities to make extra efforts to inspect and prevent production, imports, marketing and sales of these products.  

  • India Specifies New Health Warnings

    India Specifies New Health Warnings

    Photo: Taco Tuinstra

    India’s Ministry of Health on July 23 issued new sets of specified health warnings with enhanced pictorial images to be printed on all tobacco products. The amended rules will be applicable from Dec. 1, 2020, and will be in force till 12 months thereafter.

    In a statement, the Health Ministry said, “All tobacco products manufactured or imported or packaged on or after Dec. 1, 2020, shall display the first set of images while the second set of images will be displayed by the tobacco products manufactured or imported or packaged on or after Dec. 1, 2021. Any person engaged directly or indirectly in the manufacture, production, supply, import or distribution of cigarettes or any tobacco products shall ensure that all tobacco product packages shall have the specified health warnings exactly as prescribed.”

    Violators risk imprisonment or fines as prescribed in Section 20 of the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act of 2003.