Author: Staff Writer

  • Universal to webcast results conference

    Universal Corp. is due to webcast a conference call at www.universalcorp.com from 5 p.m. Eastern Time on Aug. 6 following the mid-afternoon release of its results for the first quarter of fiscal year 2014.

    The conference call, which will be in listen-only mode, will be hosted by Candace C. Formacek, vice president and treasurer.

    A replay of the conference call will be available at the same website until Nov. 5.

    And a taped replay of the conference call will be available from 8:30 p.m. on Aug. 6 until Aug. 20 at (855) 859-2056, using the telephone replay identification number 27518030.

  • African Pride

    African Pride

    Photos: Pan African Tobacco Group

    Constructing a new GLT in Uganda, Pan African Tobacco Group underscores its commitment to its home continent.

    By George Gay

    As its name implies, the Pan African Tobacco Group (PTG) has its roots firmly set in the African continent. It employs thousands of Africans at its tobacco processing and manufacturing plants, and throughout its distribution chains, and it supports many others in sourcing its leaf tobacco and manufacturing supplies. In short, its interests are closely tied to those of Africa and its people, and, I suppose, it is true to say that the interests of Africa and its people are closely tied to companies such as PTG.

    An example of this close relationship was on display earlier this year when PTG’s founder, Tribert Rujugiro Ayabatwa, announced the investment of $20 million in a new green-leaf threshing plant and warehouse at Arua, Uganda. The first sentence of the announcement included the news that the plant would directly create 700 new jobs—100 permanent and 600 seasonal—and support thousands more throughout Africa. In fact, later it was stated that the project was set to create 150 permanent and 1,000 seasonal jobs once the new plant was fully operational. The plant’s operations will help support 23,000 tobacco growers: 13,000 in Uganda and 10,000 in the Democratic Republic of the Congo (DRC) and South Sudan. And its operations will mean that PTG will have to contract with about 1,500 drivers to transport the plant’s output from Arua to the company’s factories at Kampala, Uganda; Bujumbura, Burundi; Dar es Salaam, Zanzibar, Tanzania; Yei, South Sudan; and Goma, DRC.

    The new plant will include a 30,000-square-meter warehouse and a factory for processing up to 10 tons of green tobacco an hour.

    Tribert Rujugiro Ayabatwa

    But surely one of the most interesting aspects of the project came to light when I asked the question: Is there anything about the plant under construction that is unusual? “Yes,” Ayabatwa said. “PTG is committed to developing the communities where it operates; it positions its plants in areas where there is no basic infrastructure such as water, electricity, etc. …” This was not the usual sort of response to such a question, and it was not the one I had been expecting, but it again illustrated the sort of social investment that PTG seems to making: The plant will simply have to provide water and electricity.

    There was little surprise then that Uganda’s state minister for trade, industries and co-operatives, David Wakikona, who was the guest of honor at a groundbreaking ceremony on May 17, described the plant as a landmark moment for the country and region. Calling the new facility a job creator and a timely investment, he praised PTG for its commitment to improving tobacco production and the quality of exports to other regions.

    “This factory of such funding magnitude in a rural setting like Arua is a landmark in the history of Uganda,” Wakikona said. It was especially important, he added, because of the jobs that would be created, and because of the associated amenities that would benefit the rural population and put more money into the pockets of local people.

    PTG already has a strong presence in northern Uganda, where it invests $18 million a year in tobacco farming. And that amount was expected to double during the next five years to meet demand, Ayabatwa said. “This expansion will allow us to create new, good-paying jobs in an important part of Africa,” he added. “It will also allow us to farm and process tobacco more efficiently and cost effectively. I couldn’t be more delighted with this investment.”

    The company buys about 15 million kg of leaf tobacco a year, largely flue-cured, burley and dark fire-cured, from Angola, DRC, Tanzania, Uganda, Zimbabwe and Brazil. Some of the tobacco is sourced from contract farmers, some from PTG’s direct commercial-farming operations, and some from Africa’s auction floors, while the rest is bought under annual contracts with international dealers.

    When I asked how PTG ensured, in a competitive world, that it paid tobacco farmers fair prices, Ayabatwa said that PTG believed in the long-term sustainability of the tobacco industry in Africa. “Not only do we make sure that a fair price is paid to both our farmers and small growers, but we also invest in social and environmental responsibility initiatives in the communities where we operate,” he added.

    This raised a question about how PTG ensured the tobacco it bought was grown in a sustainable way. “PTG trains and supports farmers and food crops by supplying food seeds and running a reforestation program,” said Ayabatwa.

    Strong fundamentals

    Currently, PTG has two green-leaf threshing plants, one in DRC and one in Uganda, which thresh and pack flue-cured, burley and dark fire-cured leaf. And the company operates nine manufacturing plants, seven of which have their own primary departments.

    The company produces at its manufacturing plants a range of local cigarette brands and five that have a pan-African presence: Forum, Legends, Peterfields, Supermatch and Yes. Most of its cigarettes are Virginia blends, but it offers also American blends. All but one of its cigarettes are filtered, with tar and nicotine levels that vary according to the regulations in the country of sale, but that, generally, are around 10 mg and 1 mg, respectively. Formats include king-sized and 100 mm cigarettes, and packs are both hinge lid and soft cup.

    PTG said it was constantly developing new cigarette brands and line extensions, and that it also manufactured roll-your-own and pipe tobaccos. And, like any other tobacco manufacturer, it followed international trends when it came to considering the introduction of alternative tobacco products and, even, e-cigarettes.

    The company distributes its tobacco products using what Ayabatwa described as a competitive mix of company-owned and third-party distributors, depending on the country.

    Ayabatwa didn’t want to disclose how many cigarettes PTG sold each year, but he said the number was increasing because of growth in the African market. And he seems confident about the future of the tobacco industry. “Despite the anti-smoking lobby, tobacco will always be one of the major, fast-moving products offering pleasure to those who choose to smoke,” he said.

    When I asked Ayabatwa whether PTG was a profitable company, he replied that, “on a group level it meets industry standards but reinvests to sustain its growth and development.” And when I further asked whether profit was increasing year on year, he said, “Yes, but this profit increase is used to reinvest in new markets.”

    Passing the baton

    If these answers sound slightly different—more equivocal, perhaps—than those you might expect to receive from a successful entrepreneur who has built up a group of businesses that, alongside tobacco, include cement, tea, plastic shoes, beer and snack foods, it’s not just that Ayabatwa dares to be different. When, in January, he announced that he was retiring from the daily operations of PTG, he made the point that making money had never been his goal but a means to an end—the end being “building something up, creating something.” “That is what I tried to accomplish, and that is the legacy I leave to my sons and son-in-law,” he said.

    I guess that to say he was successful is something of an understatement. From his roots as a young Tutsi in Rwanda and a refugee in Burundi, Ayabatwa overcame overwhelming odds to build up a group of businesses that employ about 26,000 people (who support about 182,000 people) from South Africa to the United Arab Emirates, from Angola to Tanzania.

    But, now, he has left all that to Paul Nkwaya, his eldest son, who serves as the group’s marketing director; his youngest son, Richard Rujugiro, who is technical director; and his son-in-law, Serge Huggenberger, who is financial director.

    Ayabatwa is continuing to advise his sons and son-in-law on company management but is also spending more time on his charitable endeavours. Over the years, he has financed hundreds of scholarships for primary, secondary and university students and—along with his PTG companies—has engaged in numerous other charitable works, including donating cement for area infrastructure, providing seedlings and food to farmers and factory workers and offering job training to unemployed African widows.

    And, given his background, it will come as no surprise that he is developing a foundation mainly to help aspiring African entrepreneurs. Separate from PTG, Ayabatwa is developing a private, nonprofit foundation to provide startup capital, training and education to aspiring African youth. The foundation will offer internships to African engineering students so they can gain the practical experience they need to succeed.

    But, returning to PTG for a moment, I asked how Ayabatwa saw the future for the company. “PTG has established its roots in Africa over the past decades and will continue to grow in line with industry standards and the African economy as a whole,” he said. “We have no doubt that, although it will always retain its African identity with pride, the future of the group will extend far beyond the continent in the coming decades.”

    George Gay is Tobacco Reporter’s European editor, but his territory spans the globe. Based in London, George has covered the tobacco industry since 1982, initially for a U.K.-based publication and since 2004 for Tobacco Reporter. George’s understanding of industry issues, combined with his keen sense of observation and dry wit, have earned him a loyal following among Tobacco Reporter’s readers.

  • E-cigarette company appoints former tobacco executive as president

    Miguel Martin, a former senior tobacco executive, has joined the electronic cigarette company Logic Technology as president.

    According to a press note issued through PRNewswire, Martin “will lead Logic Technology’s rapid growth, developing and implementing a strategic plan to accelerate Logic’s status as a leader in the electronic cigarette industry.”

    “This is an exciting time for Logic Technology, and we are thrilled to bring a key executive with vast experience of the tobacco industry on board,” said Eli Alelov, CEO of Logic. “Miguel’s unique background, relationships and understanding of the business will build upon Logic’s vision for its consumers and trade partners.”

    Martin began his career at Philip Morris USA, and, over the course of 18 years, he served in various sales and marketing roles, ultimately as senior vice president field sales, where he ran the largest tobacco sales and distribution organization in the U.S., responsible for Philip Morris USA, UST and John Middleton tobacco products.

    “This is a pivotal moment in the electronic cigarette industry, and I’m thrilled to be joining Logic’s team at a time of great opportunity for the industry as a whole and particularly for Logic and its trade partners,” said Martin. “Logic is a leader in the space, and I’m looking forward to further enhancing the brand’s presence in the United States.”

    Martin has joined at the right time. Logic said yesterday that the results of Nielsen’s Item Rank Report had indicated the company outperformed its competitors in the second quarter of 2013 for sales per point of distribution.

    “Just six months after an independent survey found Logic to be the best-selling and most popular electronic cigarette brand in New York City, the total U.S. Nielsen Item Rank Report is more evidence to support the company’s solid, continuous growth,” the company said in a press note issued through PRNewswire.

  • Smokers to pay for budget shortcomings

    Tomorrow’s mini-budget will contain bad news for Australian smokers, according to a story by Mark Kenny for The Sydney Morning Herald.

    The government is set to announce the imposition of four 12.5 percent annual increases in federal tobacco excise, which will push the price of cigarettes toward a dollar each.

    The measure is among several unpopular decisions to be unveiled in the budget statement designed to pay for new election spending while maintaining Labor’s promise to get back to surplus in 2016–2017.

    The four tobacco excise hikes will occur on Dec. 1; Sept. 1, 2014; Sept. 1, 2015; and Sept. 1, 2016.

    The Treasury estimates they will raise $5.3 billion over the four-year period.

    It is expected that the price of a pack of 20 Winfield Blue cigarettes will rise by $0.98 after the first increase and by $5.25 by December 1, 2016.

    Treasurer Chris Bowen said the increase would fund cancer-related health services while discouraging smoking and helping the budget.

    The increases seem likely also to ensure that supporters of standardized packs will be able to point to declines in sales of licit cigarettes following the introduction of such packs in December last year.

  • NewCo widens Vietnam offering

    Khoi Pham, who has been NewCo International’s main Vietnam-based supplier of leaf tobacco, has agreed to be the company’s representative in Vietnam with immediate effect.

    Khoi will oversee NewCo’s sourcing and sales of tobacco in Vietnam.

    And his presence, the company said, would mean that it would be able to offer additional tobaccos and services out of Vietnam.

  • Scientists demonstrate how to become a blabbermouth without uttering a word

    A team of researchers at the National Taiwan University in Taipei are currently perfecting—if that is the right word—a device that could inform doctors and dentists whether and when their patients have been eating, drinking and smoking, according to a story by Adam Clark Estes in Gizmodo.

    Mouths make unique motions depending on whether they are being used to eat, drink, smoke or talk, and the team’s Bluetooth-ready fake tooth records these motions.

    In a study with eight participants, the tooth recorded their mouth activities with 94 percent accuracy.

    The prototype was connected to a computer and power source with a small wire leading out of the mouth, but the final version will be Bluetooth-enabled and battery-powered.

  • Video interview: BAT CEO Durante on 2013 half-year results

    This video was originally published by Mercantos Investor Video, a provider of financial news, featuring video interviews and webcasts from FTSE100 and FTSE250 companies.

  • BAT’s volume down in first six months

    British American Tobacco’s cigarette volume during the six months to the end of June, at 332 billion, was down by 3.4 percent on that of the six months to the end of June 2012.

    Volume was increased in the company’s Asia Pacific region by 5.5 percent to 100 billion, but it was down in its other three regions: in the Americas by 9.4 percent to 64 billion; in Western Europe by 8.3 percent to 57 billion; and in the EEMEA (Eastern Europe, the Middle East and Africa) by 4.5 percent to 111 billion.

    The company’s four global drive brands outperformed the totality of its offering. Dunhill’s volume increased by 6 percent, with growth in Indonesia, Chile, South Africa and South Korea partially offset by declines in the GCC and Brazil, mainly as a result of the one-off impacts in the comparator period.

    Kent maintained market share despite lower volume of 3 percent due to industry declines in Russia and Romania, partially offset by growth in other Eastern European markets.

    Lucky Strike’s volume was down by 7 percent, mainly driven by the market contraction in Spain and instability in the Middle East, partially offset by higher volumes in Germany, France, Philippines, Poland and Argentina.

    And Pall Mall’s volume rose by 8 percent, with strong growth in Pakistan, Chile, Romania, Canada and Mexico partially offset by lower volumes in Russia and Spain.

    Total tobacco volume, which includes other tobacco products converted as cigarette equivalents, was down by 3.1 percent to 346 billion.

    Fine-cut volume grew by 6.7 percent to 10 billion cigarette equivalents in Western Europe, mainly in Spain, Italy, Poland, Belgium and France. And Pall Mall was said to have remained “by far the biggest brand in Western Europe in this category.”

    BAT’s revenue during the six months to the end of June, at £7,572 million, was up by 2 percent on that of the six months to the end of June 2012.

    Adjusted profit from operations was up by 4 percent to £2,944 million; profit from operations was up by 3 percent to £2,807 million; adjusted diluted earnings per share were up by 8 percent to 109.1p; and basic earnings per share were up by 9 percent to 106.6p.

    “We performed well during the first half of the year with strong pricing momentum, increased market share and continued growth in our global drive brands, strengthening the foundations for another year of good results in line with our long term strategic goals,” CEO Nicandro Durante said in reviewing the results.

    “The underlying business performance, measured by constant rates of exchange, was strong, with revenue up by 4 percent, adjusted profit up by 6 percent and adjusted diluted earnings per share up by 10 percent.

    “The business performance was impacted by industry volume contraction in some parts of the world and fragile economic conditions persisting, notably in Europe. Despite the good performance in Asia-Pacific, group cigarette volume from subsidiaries was 332 billion, down 3.4 percent. This was also adversely compounded by trade inventory movements last year in specific markets, notably Brazil and the GCC, and the leap-year impact. Excluding these one-offs, the cigarette volume decline would have been 2 percent.

    “We continued to grow cigarette market share in our top 40 markets, led by the good performances of the global drive brands. Globally, Dunhill, Lucky Strike and Pall Mall all grew market share, while Kent was stable. Collectively, our four GDBs achieved good volume growth of 2.3 percent. Our other international brands grew by 1.9 percent and, combined with our global drive brands, now make up nearly 60 percent of our total cigarette volume.

    “This month, CN Creative, our stand-alone company specializing in the development of next-generation products, launched Vype in the U.K., the group’s new e-cigarette brand. This is another step in our ongoing commitment to developing a portfolio of next-generation products alongside our tobacco business.”

  • Retiring BAT COO will not be replaced

    John Daly will step down as British American Tobacco’s chief operating officer at the end of December and will not be replaced.

    “It is not intended, at this point in time, to appoint a further executive director or successor to the role of chief operating officer,” a note on BAT’s website said. “The four regional directors and the group operations director will report to the chief executive officer directly from 1 January 2014.”

    Daly was appointed to the management board in 2004, joining the main board as COO in 2010. During his 19-year career with BAT, he held various senior management positions, notably marketing director—P J Carroll, area director—Middle East & North Africa and regional director—Asia Pacific.

    “The board and I wish John all the very best for a thoroughly well-earned retirement,” said CEO Nicandro Durante. “We will all miss John’s passion, commitment, energy and great humor.

    “John has played a huge role in the history of British American Tobacco, steering all the businesses he has run to outstanding results. He will be remembered for his love of the business and his commitment to the people in the organization. He leaves behind a true leadership legacy.”

    According to the note, during the first quarter of 2014, Daly will “focus on the transitioning of key projects and initiatives.”

    He will retire from the board in April 2014.

  • Ireland’s illicit trade booming

    The National Federation of Retail Newsagents (NFRN) in Ireland is advising the government to tackle the sale of illicit cigarettes, according to a story in the Irish Examiner.

    The story said that a new [unspecified] survey had shown that almost 28 percent of discarded packs across the country were untaxed and, therefore, illicit.

    The survey, covering 22 major centers, revealed also the existence of regional black spots where the illicit trade in cigarettes is on the increase.

    The president of the NFRN, Joe Sweeney, is calling for the introduction of on-the-spot fines for the possession of counterfeit tobacco, as is the case in Canada.

    The research showed that smokers in Drogheda, County Louth, and Tallaght, Dublin, were the biggest consumers of illicit cigarettes, while smokers in Clonmel, County Tipperary, consumed the fewest.