Author: Staff Writer

US tobacco manufacturers are due to receive huge credits in respect of their 10-year dispute over Master Settlement Agreement payments.

Philip Morris USA said yesterday that the arbitration panel in the pending Non-Participating Manufacturer (NPM) adjustment proceeding had issued a Stipulated Partial Settlement and Award that would allow the settlement agreement reached in December to proceed.

‘PM USA and other cigarette manufacturers reached the agreement with 17 states, the District of Columbia and Puerto Rico to resolve long-standing disputes related to the NPM adjustment provisions of the Master Settlement Agreement (MSA) for the years 2003 to 2012,’ the company said in a note posted on its website.

‘PM USA believes this agreement resolves the disputes with the signatory states on financial terms that are fair to the parties and in a way that will lead to a better method of resolving these issues in the future. Now that the panel has upheld this agreement, PM USA hopes that more states will join in the settlement.

‘The agreement includes a release to the signatory states of their portion of more than $4 billion from disputed payment accounts. In return, the manufacturers will receive credits against the signatory states’ portion of future MSA payments in settlement of their 2003-2012 NPM adjustment claims against those states. For the signatory states, the settlement is net cash positive and also removes the risk of substantial reductions of MSA revenues for the years in dispute, 2003-2012.

‘For those states that do not join, PM USA intends to continue to pursue the disputed NPM adjustments for 2003 and beyond. As part of the award, the arbitration panel also ruled that the 2003 NPM adjustment claim against the non-signatory states would be reduced pro rata in light of the settlement with the signatory states. A number of the non-signatory states raised objections concerning the settlement agreement with the arbitration panel, and some of these states have indicated that they may seek relief in state court to prevent the settlement from proceeding or for other measures with respect to the settlement. PM USA intends to contest any such efforts in state court.

‘PM USA’s credit is estimated to total approximately $450 million based on the current signatory states. This estimate is subject to change depending on a variety of factors related to the calculation of the credit. If the agreement proceeds, PM USA expects to record a corresponding increase in its reported pre-tax earnings.

‘The jurisdictions that have agreed to join the settlement to date are Alabama, Arizona, Arkansas, California, District of Columbia, Georgia, Kansas, Louisiana, Michigan, Nebraska, Nevada, New Hampshire, New Jersey, North Carolina, Puerto Rico, Tennessee, Virginia, West Virginia, and Wyoming.’

Meanwhile, R.J. Reynolds Tobacco Co said in a note posted on its website that the Arbitration Panel hearing its claim related to its 2003 Master Settlement Agreement (MSA) payment had issued an order authorizing the implementation of the Term Sheet announced in December among the company, various other tobacco manufacturers, 17 states, the District of Columbia and Puerto Rico. As a result of the Panel’s order, the Term Sheet was now binding on all signatories.

‘Under the Term Sheet, based on the jurisdictions that have joined the agreement thus far, R.J. Reynolds will receive credits, currently estimated to be more than $1 billion, with respect to its Non-Participating Manufacturer (NPM) Adjustment claims related to 2003 through 2012,’ the company said. ‘These credits will be applied against the company’s MSA payments over the next five years.

‘The current arbitration, related to the 2003 NPM Adjustment, will proceed to its conclusion as to those contested states that have elected not to join the settlement agreement. Decisions as to these states are expected from the Arbitration Panel by the end of 2013.

‘Several states who are not signatories to the Term Sheet have stated that they may seek relief in state court to prevent the settlement from proceeding.’

The board of directors of Philip Morris International yesterday declared a regular quarterly dividend of $0.85 per common share, payable on April 12 to shareholders of record as of March 28.

The ex-dividend date is March 26.

The Edelmann packaging group said yesterday that its 2012 turnover, at €233 million, was up slightly on that of 2011.

The group said that growth was being driven by high order levels from outside its base in Germany.

Five of its 12 production sites are located outside Germany and it remained convinced that its strategy of maintaining a strong international focus was the right one.

The company is planning to acquire a company in Asia in 2013, when it is expecting to increase its turnover to €250 million.

A suggestion that the US Food and Drug Administration should require ‘nicotine content’ to be below addictive levels might reduce the number of addicted smokers in the long term, but it would be detrimental to smokers in the short term, according to Dr. Gilbert Ross, of the American Council on Science and Health.

The suggestion was apparently put forward by Richard Daynard, a NortheasternUniversity law professor and president of its Public Health Advocacy Institute, writing in the New York Times.

Daynard said the FDA would be well within its authority under the 2009 Family Smoking Prevention and Tobacco Control Act to require nicotine content to be below addictive levels.

He also proposed that cities and states adopt a proposal called the ‘Smokefree Generation’, in which no one born in or after 2000 could ever be sold cigarettes legally.

“It’s hard to imagine too many parents objecting, and it would easy for retailers to enforce,” Daynard wrote.

“In the United States, it would provide a useful focus for state and local public health officials to do something game-changing, rather than sitting on the sidelines waiting for Washington to act.”

The goal of these proposals, neither of which is completely new, would be a nation with a smoking rate of under 10 per cent, or about half of what it is in the US today.

Ross described the proposals as intriguing, but said that there would be a major short-term detriment to lowering nicotine levels. “If you look at the long term, five or 10 years out, maybe you’d have fewer addicted smokers,” he said. “But in the short term, it would unquestionably increase the toxic effects of smoking. Smokers would take more puffs and inhale more deeply to get that addictive nicotine.”

Nevertheless, Ross said that Daynard’s proposals were worth considering and should not be dismissed out of hand.

In a sign perhaps that battle lines are finally being drawn between traditional and electronic cigarettes, INCIG UK is today launching two premium-range electronic cigarette starter kits ‘to promote’ no smoking day.

According to a press note issued through PRNewswire, INCIG claims to be the ‘most affordable alternative to cigarette smoking in the UK…’.

Its products are said to be available in three tobacco flavors and four other flavors that include menthol and vanilla.

The electronic cigarette company, blu eCigs, is sponsoring the Electric Lounge at the SXSW Music Festival in Austin, Texas, which is due to take place on March 14 -16, according to a PRNewswire press note.

The company said that it had revamped the venue inside and out, ‘bringing in diverse artists, leading sound providers and unsurpassed lighting for concertgoers’.

‘The Electric Lounge will also provide a unique experience for concert fans to enjoy device charging stations, lounge areas, a VIP bar and an interactive social media photo booth,’ the press note said.

‘Blu eCigs will be onsite providing adult smokers with the opportunity to sample blu disposable products in their choice of Classic Tobacco or Magnificent Menthol flavors.’

Malawi tobacco growers were pleased on Monday with the opening of the 2013 tobacco marketing season as prices, buoyed by the weakening of the kwacha, looked good, according to a story by Dumbani Mzale for the Malawi Nation Online.

In early sales, Burley fetched from US$0.90 per kg (K360) to US$2.30 (K880) per kg.

Most tobacco growers at the Lilongwe Auction Floors were excited at these prices and pleaded with tobacco merchants to maintain them for the rest of the marketing season.

Most of the tobacco delivered during the early part of the auction season will comprise lower leaf, which is generally of lower quality than the rest of the tobacco.

President Joyce Banda, who officially opened the marketing season after touring the auction floors, described this year’s crop as being almost twice as big as last year’s – very small – harvest, and of good quality.

She said there had been continuous dialogue between herself, government representatives and all stakeholders in the tobacco industry, resulting in a broad ownership of the reforms that had been introduced, including the Integrated Production System.

Talk of price increases has done wonders for cigarette sales in South Korea.

According to a story by Yoo-jin Lee and Sun-ah Kim for the Maeil Business Newspaper, sales have risen rapidly at the country’s large-scale discount stores and convenience stores since the possibility of prices rises was first raised on Wednesday last week.

This is perhaps not surprising. Korean smokers are unused to tax increases – the most recent one was in 2005 – and the Ministry of Health and Welfare is on record as saying that the retail price of cigarettes should climb to WON5,000 – from WON2,500.

Cigarette sales at large-scale stores had gone from contraction to abrupt growth, the story said.

They had jumped by 30 per cent at Lotte Mart since Wednesday of last week.

Sales at Lotte Mart reached their highest level in 2008 and then shrank by 11.3 per cent in 2009, 8.7 per cent in 2010, 15.7 per cent in 2011 and 15.6 per cent in 2012.

People living in townhouses, condominiums and other attached units would be prohibited from tobacco smoking indoors under a ban proposed by a California state lawmaker, according to a story in the San Francisco Chronicle.

The ban is said to comprise the most sweeping anti-tobacco-smoking legislative proposal in the US.

The law would ban tobacco smoking inside any multi-unit residence – apartment, condominium, duplex or townhouse.

But outdoor smoking would be permitted in designated areas at least 20 feet away from housing units.

And single-family detached homes would not be included because they don’t share walls or ventilation systems.

Marijuana smoking is not addressed by the proposed bill.

The rationale for the bill is that when neighbors light up, the smoke filters through ventilation systems, pipes, walls and ceilings, electrical sockets and even cracks in plaster.

“Home is where you should have the right to breathe clean air,” said Assemblyman, Marc Levine, who introduced the bill, AB746, and who noted that a third of Californians lived in multi-unit complexes.