Category: News This Week

The Vector Group has announced that it and its Liggett Group tobacco subsidiary have reached a comprehensive settlement resolving most of the individual Engle progeny tobacco litigation cases pending in Florida.

The Engle progeny cases stem from a 2006 Florida Supreme Court decision that decertified a class action but allowed former class members to file individual lawsuits and rely on general findings from the first class action.

“Under the settlement, which does not require court approval, more than 4,900 of the approximately 5,300 individual Engle plaintiffs will be dismissing their claims against Vector Group and Liggett,” Vector said in a statement.

“The company [Vector] expects to incur an after-tax charge of $53 million in the third quarter of 2013 related to the settlement agreement. Pursuant to the terms of the agreement, Liggett will pay a total of $110 million (or a present value, net of income taxes, of $53 million), with approximately $61 million ($38 million, net of income taxes) to be paid in a lump sum, and the balance of approximately $49 million (or a present value, net of income taxes, of $15 million) to be paid over 15 years.

“The settlement is expected to be finalized within 90 days and is contingent upon delivery of the required settlement documents by plaintiffs’ attorneys.”

“We are pleased to reach this landmark settlement, which prudently resolves substantially all of the Engle progeny cases pending against us,” said Bennett S. LeBow, chairman of Vector Group’s board of directors. “The Engle progeny cases have been the biggest litigation overhang on our company in the last decade, and this settlement substantially reduces the ongoing litigation risks, as well as related legal fees and expenses, of these cases.”

Reynolds American Inc. (RAI) yesterday reported that R.J. Reynolds’ domestic cigarette volume shipments during the three months to the end of September, at 16.7 billion, were down by 4.3 percent on those of the three months to the end of September 2012.

Reynolds’ growth brands volume, at 11.1 billion, was up by 0.7 percent, with Camel volume up by 4 percent to 5.5 billion but Pall Mall volume down by 2.4 percent to 5.6 billion.

Other cigarette brand volume was down by 12.7 percent to 5.6 billion.

Premium brands volume was down by 3 percent to 9.7 billion and value brands volume was down by 5.9 percent to 7.0 billion, giving a premium-to-total volume mix of 57.9 percent, up from 57.2 percent.

Reynolds’ market share during the three months to the end of September, at 26 percent, was down by 0.5 of a percentage point on that of the three months to the end of September 2012.

The share held by Camel increased by 0.4 of a percentage point to 8.9 percent, and that held by Pall Mall increased by 0.3 of a percentage point also to 8.6 percent, giving Reynolds a growth brand share of 17.8 percent, up 0.7 of a percentage point.

The share held by other brands fell by 1.1 percentage points to 8.1 percent.

At Santa Fe, cigarette sales—all of Natural American Spirit—during the three months to the end of September, at 1.0 billion, were up by 21.7 percent on those of the three months to the end of September 2012.

Santa Fe’s share of the retail market increased by 0.3 of a percentage point to 1.5 percent.

Meanwhile, American Snuff’s moist snuff volume shipments during the three months to the end of September, at 116.7 million cans, were up by 7.1 percent on those of the three months to the end of September 2012.

Grizzly volume was up by 8.1 percent to 105.0 million cans, while the volume of other brands taken together was down by 2.4 percent to 11.7 million cans.

American’s share of the domestic market during the three months to the end of September, at 33.4 percent, was up by 1.2 percentage points on that of the three months to the end of September 2012.

Grizzly’s share rose by 1.6 percentage points to capture 30.4 percent, while the share of other brands fell by 0.4 of a percentage point to 3 percent.

RAI’s net sales for the three months to the end of September, at $2,135 million, were up by 0.9 percent on those of the three months to the end of September 2012.

Reported operating income was up by 10 percent to $791 million, while adjusted operating income was up by 5.8 percent to $808 million.

Reported net income was up by 8.8 percent to $457 million, while adjusted net income was up by 4.5 percent to $468 million.

And reported net income per diluted share was up by 13.5 percent to $0.84, while adjusted net income per diluted share was up by 8.9 percent to $0.86.

“Strong performance by Reynolds American’s reportable business segments in the third quarter once again drove gains in both margins and earnings,” said Daniel M. Delen, president and CEO. “Our companies continued to make significant investments in equity-building initiatives on their key brands and in the expansion of Vuse digital vapor cigarettes for long-term sustainable growth.”

Delen said he was especially pleased to report that RJR Tobacco, American Snuff and Santa Fe continued to make progress in the highly competitive marketplace, delivering market share increases on all key brands.

And he said that a highlight of the quarter had been R.J. Reynolds Vapor Company’s expansion of Vuse digital vapor cigarettes to Colorado in July. “We are excited by the enthusiastic response to Vuse from consumers and retailers in Colorado,” Delen said. “Vuse has already captured market leadership in the state, which bodes well for the brand’s national expansion plans.

“Vuse is a highly differentiated product, and we believe that the brand will carve out a strong position in the rapidly growing e-cigarette market as adult smokers migrate to smoke-free alternatives.

“Vuse is a great example of the type of successful innovation that is driving our strategy to transform the tobacco industry over the long term.”

British American Tobacco’s cigarette volumes during the nine months to the end of September, at 501 billion, were down by 3.2 percent on those of the nine months to the end of September 2012.

According to an interim management statement posted on the company’s website, volumes were down in all of the company’s regions with the exception of the Asia Pacific, where they rose by about 5.7 percent to 149 billion.

In the Americas, volumes were down by about 6.7 percent to 97 billion; in Western Europe they were down by about 8.4 percent to 87 billion; and in Eastern Europe, the Middle East and Africa they were down by about 5.1 percent to 168 billion.

Total tobacco volumes, incorporating OTPs calculated as stick-equivalents, were down by 3 percent to 521 billion.

The overall cigarette volume was said to be down because of industry volume declines, excise-driven trade inventory movements in Brazil and the leap-year comparator.

Nevertheless, BAT said that its overall market share had grown, and that its global drive brands volumes had risen by 1.9 percent, pushing these brands’ market share up strongly in the group’s top 40 markets.

“Dunhill volume increased by 9.6 percent, with good growth in Indonesia, South Korea and the GCC,” the statement said. “Kent was 4 percent lower, driven by market declines in Russia, Romania and Ukraine. Lucky Strike volume was down by 5.3 percent, with increases in the Philippines, Brazil and Poland, more than offset by market declines in Spain and lower volume in the Middle East. Pall Mall was up by 5.2 percent, largely as a result of growth in Pakistan, Romania, Chile and Argentina, partially offset by declines in Russia, Uzbekistan, Germany and Spain.”

Other tobacco products were said to have performed well, with fine-cut tobacco growing, driven by a 3.3 percent increase in Western Europe. Sales of Pall Mall, described as the biggest fine-cut brand in Western Europe, were up by 10.7 percent with growth in Belgium, Spain, France, Italy and Germany.

Group revenue for the nine months to the end of September, at constant rates of exchange, grew by 3.5 per cent on that of the nine months to the end of September 2012, driven by strong pricing. At current exchange rates, revenue grew by 0.7 per cent, as movements in some of the group’s key trading currencies continued to adversely impact reported revenues.

“The Group continued its good performance against a backdrop of adverse exchange rate movements, lower industry volume and instability in some parts of the world,” said chief executive Nicandro Durante.

“We have grown revenue and market share, our pricing momentum remains strong and our global drive brands continue to perform well.

“During the period, the group launched its first next generation product, Vype, and early signs are encouraging. We remain on track for a year of solid earnings growth.”

Lorillard is appealing to people to write to the U.S. Food and Drug Administration in support of the legal sale of menthol cigarettes.

In a press note, the company said the FDA was seeking information to help it determine whether or how to regulate menthol in cigarettes beyond the existing regulations that applied to all cigarettes.

“Lorillard believes that the best available scientific evidence does not show that menthol cigarettes are more harmful than non-menthol cigarettes and that Americans have a right to make a personal choice to use any legal product,” the company said.

“If [the] FDA imposed a ban or any severe regulations affecting menthol cigarettes, it would impact 30 percent of the U.S. cigarette market with serious unintended consequences.

“Many thousands of working Americans rely on menthol sales for their jobs, including those who manufacture them. Overall, nearly 500,000 U.S. jobs depend in whole or in part on the sale of menthol through existing legal channels.

“A ban on menthol in cigarettes risks giving rise to an entire industry of unregulated cigarettes sold illegally on the underground market and worsening the already widespread illicit sale of cigarettes.

“Criminal activity resulting from the illicit sale of cigarettes will add even more burdens to already constrained law enforcement efforts.

“Illicit markets carry public health costs by:

* Undermining laws to prevent sales of cigarettes to minors since cigarettes will not be sold in retail stores that check purchasers for legal age.

* Exposing smokers to more dangerous ingredients and constituents in cigarettes made by illegal manufacturers that are not under the scrutiny of FDA.”

Comments on the menthol-in-cigarettes debate, which must be received by the FDA by Nov. 22, can be made at http://www.regulations.gov/#!submitComment;D=FDA-2013-N-0521-0079.

And there is more information on Lorillard’s views at www.understandingmenthol.com, and at http://www.lorillard.com/support-menthol-cigarettes/#sthash.ZibEGmaC.dpuf.

Doctors have challenged a statement by Milos Zeman, the president of the Czech Republic, who reportedly said that tobacco smoking posed no health risk if smokers took up the habit after the age of 27, as he did, according to a story in the Prague Daily Monitor.

Zeman was said to have made the statement during a visit to the Philip Morris cigarette facility at Kutna Hora, central Bohemia.

A chain smoker, Zeman suffers from diabetes, and doctors have recommended that he should at least limit his smoking if he is unable to give it up completely.

Doctors were described as feeling indignant at his words. “This is definitely not a recommendation a sane person should give,” said Eva Kralikova, a specialist in smoking addiction treatment. “It is as if the president said that putting one’s nose in a car exhaust after the age of 27 is harmless.”

Meanwhile, Vitezslav Kolek, head of the lung specialists’ association, was quoted as saying that public comments on the consequences of smoking should be in harmony with scientifically founded facts.

He said expert studies proved that smoking was harmful and cut human life short, and that it paid to stop smoking. The people who stopped smoking aged 25–35 prolonged their lives by up to 10 years. The later one gave up smoking, the shorter the prolongation was, because some changes in the organism were irreversible, he added.

At least 94 percent of tobacco users in India have no intention of quitting, according to a Times of India story quoting a recent report by the Tobacco Control Policy Evaluation Project India (TCP India project).

The TCP India project is part of the International Tobacco Control Project, a multicountry initiative to evaluate the impact of the World Health Organization’s Framework Convention on Tobacco Control.

The report’s researchers conducted face-to-face interviews with 8,000 tobacco users and 2,400 non-tobacco users across four states (Bihar, Madhya Pradesh, West Bengal and Maharashtra), focusing upon one city and its surrounding rural district in each state.

It found that current tobacco use among adults aged 15 years and older ranged from 23 percent to 47 percent.

Smokeless tobacco was the most common form of tobacco product used in all four states, with at least two out of five adults using smokeless tobacco.

According to the report, there are about 275 million tobacco users in India.

Holmen, the forest industry group to which Iggesund Paperboard belongs, has been rated as one of 100 world leaders in business sustainability.

The United Nation’s Global Compact has set up a new global stock index (Global Compact 100 – GC 100) that takes into account the sustainability of a business and its financial performance.

Holmen is one of five Swedish companies, and the only forest industry company based in Sweden, to be included in the list of top 100 companies best at creating good returns through sustainable business practices.

“Naturally we’re delighted and proud to be included in the new GC 100 index,” said Lars Strömberg, Holmen’s director of sustainable and environmental affairs.

“The UN Global Compact is an important platform for companies committed to sustainable development, and the GC 100 index is a welcome addition.”

Since 2007 Holmen has been a member of the UN Global Compact, in which companies report their operations under 10 principles covering human rights, social conditions, the environment and anti-corruption. The GC 100 combines these results with a profitability requirement.

Most retailers in Ireland are to be forced to pay fees increased by ten-fold if they want to keep selling tobacco products, according to a story in The Irish Examiner.

As part of budget 2014, Finance Minister Michael Noonan will tell shop owners he is increasing the fee from €50 to €500, though slightly lower rates will apply to small stores.

The increase, which is due to be brought in next year, is expected to deliver an additional €5 million a year into government coffers.

The new fees will require specific legislation, but that is expected to be in place by the start of next year.

The Scottish government has said that it will press ahead with plans to require that cigarettes are sold in unattractive packs, according to a story in The Times.

It is understood that Scottish ministers want cigarettes to be sold in standardized packs along the lines of those found in Australia.

Since Dec. 1, Australia has required that all tobacco products be sold in packaging designed on behalf of the previous government to be as ugly as is possible. Packs are hugely dominated by graphic health warnings, are otherwise a standard olive color, have no logos or other design features, and have brand and variant names in a standardized font and position.

Earlier this year the U.K. government decided to hold off on any similar moves, but the Scottish government has said it will do what it needs to do, regardless of the situation elsewhere in the U.K.

Medical leaders have urged Scotland’s Celtic and Rangers football clubs to reconsider their links with an e-cigarette company amid concerns that such links will damage efforts to reduce smoking, according to a story by Lyndsay Buckland for The Scotsman.

Last month the E-lites brand said it had become partners with Celtic, allowing its products to be sold at the stadium and smoked in designated areas. A similar link-up with Rangers was revealed shortly afterward.

But the British Medical Association’s board of science has written to the clubs, raising its fears over the impact of allowing the products to be sold and used on their grounds.

In the BMA’s letter, general practitioner Dr. Andrew Thomson said sport was a health activity and clubs such as Celtic and Rangers “should be leading by example to encourage healthy living rather than advertising a smoking product, which contains the addictive substance nicotine.”

The doctor said the BMA wanted e-cigarettes to be included in the ban on smoking in public places, and encouraged organizations to prohibit their use.

Companies including ScotRail, Starbucks and the Wetherspoons pub chain were said by Buckland to be among those that had already announced bans on e-cigarettes.