Author: Staff Writer

Lorillard’s domestic-market wholesale cigarette shipments during the three months to the end of June, at 10,262 million, were down by 1.9 percent on those of the second quarter of 2012, at 10,461 million.

Shipments of Newport were down by 1.3 percent to 8,693 million, while shipments of Kent and True, Lorillard’s other full-price brands, were down by 13.3 percent to 40 million and by 12.0 percent to 43 million, respectively.

In total, full-price brand shipments were down by 1.4 percent to 8,777 million.

Shipments of price/value brands were down by 4.8 percent to 1,484 million, with shipments of Old Gold down by 8.9 percent to 117 million and those of Maverick down by 4.4 percent to 1,367 million.

Lorillard’s shipments to Puerto Rico and U.S. possessions were increased by 11.3 percent to 186 million; so domestic and overseas shipments, taken together, were down by 1.7 percent to 10,448 million.

Lorillard’s share of the U.S. domestic market during the second quarter, at 14.9 percent, was increased by 0.6 of a percentage point from that of the second quarter of 2012. Newport’s share was up by 0.6 of a percentage point to 12.6 percent.

The menthol cigarette share of the total U.S. market increased by 0.6 of a percentage point to 31.5 percent, and Lorillard’s share of the menthol segment increased by 0.9 of a percentage point to 40.2 percent.

Newport’s share of the menthol segment rose by 0.8 of a percentage point to 37.0 percent.

Meanwhile, Lorillard’s domestic-market wholesale cigarette shipments during the six months to the end of June, at 19,306 million, were down by 2.2 percent on those of the first half of 2012, at 19,748 million.

The company’s shipments of full-price brands were down by 1.6 percent to 16,517 million, with Newport’s shipments down by 1.5 percent to 16,357 million, Kent’s shipments down by 12.9 percent to 77 million and True’s shipments down by 12.4 percent to 82 million.

Shipments of price/value brands were down by 6.0 percent to 2,789 million, with shipments of Old Gold down by 12.4 percent to 218 million and shipments of Maverick down by 5.4 percent to 2,570 million.

Lorillard’s shipments to Puerto Rico and U.S. possessions were increased by 13.4 percent to 365 million, meaning that, overall, the company’s shipments were down by 2.0 percent to 19,671 million.

Net sales for the three months ended June 30, at $1,804 million, were increased by 4.2 per cent on those of the three months ended June 30, 2012.

Reported operating income was up by 11.6 per cent to $540 million while adjusted operating income was up by 8.2 per cent to $529 million.

Reported net income was increased by 10.2 per cent to $313 million and adjusted net income was up by 7.0 per cent to $307 million.

Reported diluted earnings per share (EPS) were up by 15.3 per cent to $0.83 and adjusted diluted EPS were up by 11.0 per cent to $0.81.

Meanwhile, net sales for the six months ended June 30, at $3,381 million, were increased by 3.8 per cent on those of the six months ended June 30, 2012.

Reported operating income was increased by 25.8 per cent to $1,101 million and adjusted operating income was up by 9.0 per cent to $967 million.

Reported net income was increased by 26.2 per cent to $640 million and adjusted net income was up by 8.3 per cent to $558 million.

Reported diluted earnings per share (EPS) were up by 31.0 per cent to $1.69 and adjusted diluted EPS were up by 12.2 per cent to $1.47.

“I am pleased that, in a challenging external environment, Lorillard delivered another high quality earnings quarter marked by stable cigarette volumes, strong market share gains, tight cost control and continued success of the company’s strategic initiatives, like blu eCigs,” said Murray S. Kessler, chairman, CEO and president.

“As a result, Lorillard has grown adjusted EPS 12 per cent during the first half of the year.

“With continued industry leading fundamentals, our plans to launch Newport Non-Menthol Gold, the continued success of blu eCigs and our recently increased share repurchase authorization, we are confident in our ability to continue our strong operational and financial performance throughout 2013 and into 2014.”

Philip Morris Polska said yesterday that it planned to invest more than PLN150 million (about US$50 million) in building a new facility for the production of fine-cut tobacco for roll-your-own cigarettes.

The facility, which will include offices, is to be built in the Małopolska region of Poland.

“The investment is expected to create close to 700 new jobs over the next few years, subject to the successful completion of the investment process and market conditions,” said a press note posted on Philip Morris International’s website. “The construction of the new facilities is expected to be completed by mid-2014. The company currently employs nearly 3,000 people and has invested to date over PLN1.5 billion (US$500 million) in Poland.”

“I am really pleased that Krakow was chosen by Philip Morris International for yet another investment, which will further strengthen the position of our business in Poland and our ability to continue to compete efficiently and effectively in the European market,” Olek Grzesiak, managing director Philip Morris Poland and Baltic States, was quoted as saying.

“The decision to start constructing new manufacturing and office facilities in Krakow was made due to the growth of our business in Poland. Over the past 10 years, our Krakow factory’s cigarette production volume has increased from 30 billion to over 50 billion cigarettes per year and is still growing, with about 70 percent of production destined for exports today,” Grzesiak said.

Meanwhile, Marek Kalinowski, director operations said the factory expansion would allow capacity to be increased by up to 30 percent.

As part of its initiatives aimed at supporting the reconstruction of areas affected by the great East Japan earthquake in March 2011, Japan Tobacco Inc. is due to launch its JT Reconstruction Support Project, which will provide assistance to the three prefectures most affected by the earthquake: Iwate, Miyagi and Fukushima.

In a note posted on its website, JT said the project would provide aid to local nonprofit organizations (NPOs) based and operating in the areas to assist in the reconstruction, regeneration and revitalization of the three prefectures.

The first applications for support are due to be accepted starting next month.

As a matter of course, the company engages in social programs focusing on four priority areas: social welfare, arts and culture, environmental protection and disaster relief. And to date it has organized additional assistance for the areas affected by the earthquake under existing programs, such as the JT NPO Support Program, which has come under social welfare.

But the new project, originating from the continuing JT NPO Support Program, will be operated separately. Its goal is to provide a greater level of funding for NPOs working toward recovery and ensuring the stability of their future activities.

Meanwhile, the current JT NPO Support Program will continue throughout 2014 to support the regeneration and revitalization of local communities across the country.

“By working through the Japan Earthquake Local NPO Support Fund, which was established by the nonprofit corporation Japan NPO Center, the project will accept applications and conduct a series of screenings and funding to NPOs for a period of three years,” JT said in its note. “Each year, the screening body, which will consist mainly of outside experts, will assess and approve around 20 case applications in total.”

R.J Reynolds Tobacco’s domestic cigarette volume during the three months to the end of June, at 17.0 billion, was 6.0 percent down on that of the three months to the end of June 2012.

Pall Mall volume was up by 0.5 percent to 5.6 billion, Camel volume was down by 0.9 percent to 5.5 billion, and other-brand cigarette volume was down by 15.3 percent to 5.9 billion.

Reynolds’ share of the domestic retail cigarette market during the three months to the end of June, at 26.0 percent, was down by 0.3 of a percentage point from that during the three months to the end of June 2012.

Pall Mall’s share was up by 0.5 of a percentage point to 8.9 percent, Camel’s share was up by 0.4 of a percentage point to 8.7 percent, while the share of the company’s other-brand cigarettes was down by 1.2 percentage points to 8.4 percent.

Santa Fe’s cigarette (comprising the Natural American Spirit brand) volume during the three months to the end of June, at 0.9 billion, was up by 14.6 percent on that of the three months to the end of June 2012.

At the same time, Natural American Spirit’s share of the retail market increased by 0.3 of a percentage point to 1.4 percent.

American Snuff’s moist snuff volume during the three months to the end of June, at 121.8 million cans, was up by 9.4 percent on that of the three months to the end of June 2012.

Grizzly volume was up by 10.6 percent to 109.6 million cans, while other-brand volume was down by 0.6 percent to 12.2 million cans.

At the same time, American’s share of the moist-snuff retail market rose by 0.7 of a percentage point to 33.1 percent. Grizzly’s share was up by 1.0 percentage point to 30.0 percent, while the share of the company’s other moist snuff brands fell by 0.3 of a percentage point to 3.1 percent.

Reynolds American Inc. yesterday announced its second-quarter and half-year 2013 results.

Net sales for the three months to the end of June, at $2,179 million, were up by 0.1 percent on that of the three months to the end of June 2012.

Reported operating income was up by 8.7 percent to $798 million and adjusted operating income was increased by 7.5 percent to $800 million.

Reported net income was up by 4.1 percent to $461 million, and adjusted net income was up by 2.9 percent to $462 million.

Reported net income per diluted share was up by 7.7 percent to $0.84, and adjusted net income per diluted share was up by 6.3 percent to $0.84.

In announcing the results, RAI’s president and CEO, Daniel M. Delen, said second-quarter growth in RAI’s earnings and margins reflected strong performance across all of the company’s reportable business segments. “Profits increased at RJR Tobacco, American Snuff and Santa Fe, and their powerful key brands delivered solid market-share gains,” he said.

Later, he said that as part of RAI’s efforts to transform the tobacco industry, its companies remained focused on building new platforms for growth to meet the changing preferences of adult tobacco consumers. “At R.J. Reynolds Vapor Company, the expansion of the company’s highly differentiated Vuse e-cigarettes is now underway in Colorado, and we will continue to expedite Vuse’s expansion within this exciting new category,” Delen said.

Meanwhile, Reynolds’ domestic cigarette volume during the six months to the end of June, at 31.9 billion, was 7.3 percent down on that of the six months to the end of June 2012.

Pall Mall volume was down by 0.6 percent to 10.4 billion, Camel volume was down by 3.1 percent to 10.3 billion, and other-brand cigarette volume was down by 15.8 percent to 11.2 billion.

Santa Fe’s cigarette (Natural American Spirit) volume during the six months to the end of June, at 1.7 billion, was up by 14.6 percent on that of the six months to the end of June 2012.

And American’s moist snuff volume during the six month to the end of June, at 227.3 million cans, was up by 5.4 percent on that of the six months to the end of June 2012.

Grizzly volume was up by 6.5 percent to 204.5 million cans, while other-brand volume was down by 3.6 percent to 22.9 million.

The Italian government has abandoned a proposed tax hike on electronic cigarettes after fierce opposition from shop owners and consumers, according to a story in The Local Europe, quoting La Stampa.

Campaigners successfully argued that the 58.5 percent increase would have threatened about 5,000 jobs and the 2,000 electronic cigarette shops that have opened in recent years.

The government had planned to use the €35 million tax-hike revenue to avoid cutting prison jobs.

The National Association of Electronic Smoking (Anafe) welcomed the news, though it warned that the tax might be introduced at a later date.

“We will continue to protest,” said Anafe President Massimiliano Mancini in statement. “This tax is unjust and unbalanced and we ask the government to look at possible alternatives that allow it to make up the necessary revenue.”

“The alternative is the death of a sector that was growing,” he added.

Japan Tobacco Inc. said today that it is redesigning the packaging of its Pianissimo Icene Crista and Pianissimo Icene Gracia cigarettes.

The new designs are due to be rolled out across Japan from late August.

The Pianissimo Icene brand, which is described as having a smooth taste and delivering a refreshingly ice-like menthol sensation, is said to have been well received by consumers, so the flavor and aroma of the Crista and Gracia versions will be unchanged.

“The new designs are simple and cool,” said JT in a note posted on its website. “The base tone is black and white, but the opening tape and inner frame are accented with pink, creating a consistent feel for the Pianissimo Icene line. The overall look embodies a mature sophistication and the coldness of ice.”

Assam Health and Family Welfare Minister Himanta Biswa Sarma has tabled a bill in the state assembly seeking to outlaw the manufacture, storage, sale and consumption of all smokeless tobacco products within the state.

The bill, if passed, would likely be the first in the country to cover all chewing tobacco products.

As much of the rest of the world has come to realize that tobacco’s main danger derives from the chemicals produced in burning it, and therefore that some noncombustible products (including some oral tobacco products) are less risky than are combustible ones, such as cigarettes and bidis, India has moved to banning many of its noncombustible products while retaining its combustible ones.

Philip Morris USA’s domestic cigarette shipment volume during the three months to the end of June, at 33,819 million, was down by 6.7 percent on that of the three months to the end of June 2012.

Marlboro shipments fell by 7.2 percent to 29,119 million; shipments of other premium brands fell by 10.9 percent to 2,040 million, while shipments of discount brands rose by 3.9 percent to 2,660 million.

PM USA’s share of the domestic retail cigarette market during the three months to the end of June, at 50.7 percent, increased by 0.3 of a percentage point on that of the three months to the end of June 2012. Marlboro’s share, at 43.7 percent, was unchanged, while the share of its other premium brands was down by 0.2 of a percentage point to 3.1 percent, and the share of its discount brands was up by 0.5 of a percentage point to 3.9 percent.

Middleton’s cigar shipment volume during the three months to the end of June, at 298 million, was down by 8.0 percent on that of the three months to the end of June 2012. Black & Mild brand shipments fell by 7.8 percent to 294 million, while shipments of other brands dropped by 20.0 percent to 4 million.

Middleton’s share of the domestic retail cigar market during the three months to the end of June, at 30.0 percent, was down by 0.5 of a percentage point on that of the three months to the end of June 2012. Black & Mild’s share was down by 0.5 of a percentage point to 29.8 percent, while the share of other brands was unchanged at 0.2 percent.

U.S. Smokeless Tobacco Co. and PM USA’s combined, domestic, smokeless-products shipment volume during the three months to the end of June, at 200.5 million cans and packs, was up by 4.6 percent on that of the three months to the end of June 2012.

Shipments of Copenhagen were up by 8.8 percent to 106.7 million; those of Skoal were up by 1.8 percent to 73.8 million, while those of other brands were down by 5.2 percent to 20.0 million.

USSTC and PM USA’s share of the U.S. domestic market for smokeless products during the three months to the end of June, at 55.0 percent, was unchanged from that of the three months to the end of June 2012. Copenhagen’s share was up by 1.6 percentage points to 29.0 percent; Skoal’s share was down by 1.0 percentage point to 21.7 percent, while the share of other brands was down by 0.6 of a percentage point to 4.3 percent.

Meanwhile, PM USA’s cigarette shipment volume during the six months to the end of June, at 63,320 million, was down by 6.0 percent on that of the six months to the end of June 2012.

Marlboro shipments fell by 6.4 percent to 54,554 million; shipments of other premium brands fell by 11.7 percent to 3,822 million, while shipments of discount brands increased by 4.8 percent to 4,944 million.

Middleton’s cigar shipment volume during the six months to the end of June, at 571 million, was down by 12.4 percent on that of the six months to the end of June 2012. Black & White brand shipments dropped by 12.3 percent to 563 million, while shipments of other brands fell by 20.0 percent to 8 million.

USSTC and PM USA’s combined, domestic, smokeless-products shipment volume during the six months to the end of June, at 376.2 million, increased by 4.0 percent on that of the six months to the end of June 2012.

Copenhagen shipments were up by 8.8 percent to 200.2 million; Skoal shipments were up by 0.8 percent to 138.2 million, while shipments of other brands were down by 6.7 percent to 37.8 million.

The Altria Group yesterday published its second-quarter and first-half results for 2013. Its second-quarter reported diluted earnings per share (EPS) increased by 5.0 percent to $0.63, and its second-quarter adjusted diluted EPS, which excludes the impact of special items, increased by 5.1 percent to $0.62

Altria’s first-half reported diluted EPS increased by 10.9 percent to $1.32, and its first-half adjusted diluted EPS increased by 7.4 percent to $1.16.

“Altria delivered solid financial results for the second quarter and first six months of 2013,” said Chairman and CEO Marty Barrington. “The company’s diverse business model delivered adjusted diluted earnings per share growth of 5.1 percent for the second quarter and 7.4 percent for the first half of the year.”

“All three of our reportable segments delivered adjusted operating companies income and margin growth in the second quarter and first half.

“Altria’s companies also continue to innovate with new products for adult tobacco consumers. Nu Mark’s plans for introducing MarkTen e-cigarettes into a lead market in August of this year are on track.”

The U.S. Food and Drug Administration has set the stage to restrict—or possibly ban—menthol cigarettes on the grounds that they are more appealing to new smokers, more addictive to longtime smokers and pose a greater threat to the public’s health than do unflavored cigarettes, according to a story by Melissa Healy for the Los Angeles Times.

In releasing a comprehensive review of research on menthol’s effects as a tobacco additive on Tuesday, the FDA conceded that adding peppermint oil extract to cigarettes probably didn’t make them more likely to cause diseases such as lung cancer and emphysema. But its 153-page report concluded that menthol in tobacco was linked to “altered physiological responses to tobacco smoke.” Those altered responses, in turn, might contribute to tobacco’s highly addictive qualities and drive up disease by sustaining smoking behavior.

Healy said that the release of the report opened a 60-day public comment period that could set the groundwork for new tobacco restrictions.

“[The] FDA’s actions today on menthol reflect our commitment to explore all potential options, including the establishment of product standards,” Mitch Zeller, director of the FDA’s Center for Tobacco Products, was quoted as saying.

The FDA acknowledged that the weight of any changes it might order would disproportionately affect minority communities. Menthol cigarettes are the choice of nearly 75 percent of African American smokers and roughly 30 percent of Latino smokers. By contrast, just over 20 percent of non-Latino whites smoke menthol cigarettes.

The FDA said it would sponsor three new studies of menthol as a tobacco additive, one of which would explore whether genetic differences in taste perception might explain the striking patterns of menthol cigarette use.

Meanwhile, Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities, welcomed the fact that progress was being made on menthol.

Herzog said she believed it was unlikely that menthol would be banned, though she said it would probably be a long time until a final resolution of the issue came about.

But the view was very different from Legacy and the Campaign for Tobacco-Free Kids (CTFK).

“Two years ago, the FDA’s own scientific advisory committee found that removing menthol cigarettes from the marketplace would benefit public health in the United States,” said David Dobbins, CEO at Legacy in a statement issued through PR Newswire. “The FDA does not need more information on this issue. It needs to remove menthols from the market.”

And Matthew L. Myers, president of CTFK, said, also in a statement issued through PR Newswire, that the FDA’s strong scientific conclusions regarding the harmful impact of menthol cigarettes on the nation’s health should prompt it to move as quickly as possible to ban menthol cigarettes in the U.S.

‘The FDA today [Tuesday] took the first step in the regulatory process by inviting public comment to inform its decisions about what action to take regarding menthol cigarettes and announcing that it is funding additional research relevant to regulating menthol cigarettes, the statement said. “It is critical that these actions be part of a serious and expeditious regulatory process that leads to a ban on menthol cigarettes and not part of an effort to delay action. The key is not what the FDA announced today, but how quickly the agency acts to develop a formal rule banning menthol cigarettes based on the powerful scientific evidence in the report it released today.”

Farmers in the Prakasam district of Andhra Pradesh, India, are gearing up for a major shift from chickpea to flue-cured tobacco production, according to a story in the latest issue of the BBM Bommidala Group newsletter.

Such a shift, it is said, would nullify recent efforts to restrict flue-cured growing.

Tobacco sowing in the district could go up by 30,000 to 40,000 acres and production by 40 percent; so that production could cross the 100 million kg mark in Prakasam during the coming season.

The Indian Tobacco Association has projected the Andhra crop requirement at 175 million kg for 2014.