Japan Tobacco (JT) will close two factories in Japan and shed 3,000 jobs as the company restructures its domestic tobacco operations to meet falling demand, reports The Japan Times, citing JT President and CEO Masamichi Terabatake.
The facilities slated for closure are a tobacco plant and a filter-making facility in Fukuoka Prefecture. Both will cease operations at the end of March 2022.
The company will shed about 20 percent of its 13,500 workers. It will offer buyout packages to 1,000 full-time and 150 postretirement workers while asking about 1,600 part-timers to quit. All of them are expected to leave the company at the end of March 2022.
The company will consolidate its domestic and overseas tobacco businesses while unifying its headquarters functions into Geneva in January 2022. The Japanese headquarters will be left with domestic marketing and product development functions.
Japan Tobacco’s new domestic headquarters
In Japan, JT will reorganize its operations into 47 branch offices from the current combination of 15 branch offices and 145 outposts covering smaller areas.
JT said its sales fell 3.8 percent to ¥2.09 trillion ($19.95 billion) in 2020 from the previous year. The coronavirus pandemic dragged down tobacco sales at airport duty-free shops while restaurant demand for processed food products sagged, the company said in its 2020 financial report.
Net profit dropped 10.9 percent to ¥310.2 billion, although the company booked ¥41.3 billion in proceeds from the sale of its old headquarters building.
In October, JT relocated its Japanese headquarters to a new location in Tokyo.
Philip Morris International (PMI) wants smokefree products to account for more than half of its revenues by 2025, up from its earlier target range of 38 percent to 42 percent. The new goal was announced during PMI’s 2021 investor day on Feb. 10., a virtual event broadcast from the company’s operation’s center in Lausanne, Switzerland, during which senior management presented PMI’s business strategies and growth outlook.
The company shared its 2021 to 2023 targets, including net revenue and adjusted diluted earnings per share (EPS) compound annual organic growth of more than 5 percent and 9 percent, respectively, and 2023 heated-tobacco unit shipment volume of 140 billion units to 160 billion units.
PMI plans to launch IQOS ILUMA, the next generation of its IQOS heat-not-burn product featuring internal heating based on Smartcore induction technology, in the second half of 2021.
In addition, the company intends to launch IQOS VEEV, its MESH technology vapor product, in more than 20 markets this year. PMI expects to commercialize IQOS in a total of 100 markets by the end of 2025, up from 64 markets at the end of 2020.
Also at the investor day, PMI announced its target of at least $1 billion in net revenues from “beyond nicotine” products in 2025.
With the right regulatory frameworks, dialogue and support from civil society, the company said cigarette sales can end within 10 years to 15 years in many countries.
Andre Calantzopoulos
“In just five years, we have thoroughly transformed our company, building IQOS into a top-5 global nicotine brand—with nearly $7 billion in net revenues and over 17 million users across 64 markets—while maintaining our leadership position in the international cigarette category,” said PMI CEO Andre Calantzopoulos in a statement.
“We are now embarking on our next growth phase, further shifting to a better, more sustainable business by driving the development of the smokefree category and leveraging our leading commercial model, which places the consumer at the core, to switch more adult smokers to our smokefree products.”
“This next growth phase is underpinned by our unmatched portfolio of innovative products. We are very excited to announce the planned launch of IQOS ILUMA—the next generation of our IQOS heat-not-burn product featuring a new internal heating induction technology—during the second half of this year.”
“As outlined today, we are well positioned to deliver excellent top-[line] and bottom-line growth as well as strong shareholder returns. We now aim to be a majority smokefree product company by 2025, an important milestone toward our ambition to deliver a smokefree future, to the benefit of adults who would otherwise continue to smoke, society, the company and our shareholders.”
Philip Morris reaffirmed its full-year 2021 guidance for EPS in the range of $5.90 to $6. For the three-year period between 2021 and 2023, Philip Morris is guiding for net revenue and adjusted EPS compound annual growth of 5 percent to 9 percent. Cigarette volume is expected to decline in that period. Philip Morris stock has fallen 3.5 percent over the last year while the benchmark S&P 500 index SPX, -0.03 percent, is up 16.7 percent for the period.
A transcript and slides of the Investor Day are available at www.pmi.com/2021InvestorDay. An archive of the webcast will be available until 5 pm Eastern Time on March 11, 2021.
Net sales of Turning Point Brands (TPB) increased 31.2 percent to $105.3 million for the fourth quarter of 2020. Gross profit increased 321.8 percent to $51.8 million, partly due to certain restructuring expenses incurred in the prior year period. Net income increased $25 million to $12.7 million compared to the previous year’s fourth quarter. Adjusted EBITDA increased 80.9 percent to $25.8 million.
Net sales increased 11.9 percent to $405.1 million for the full year ending Dec. 31, 2020. Gross profit increased 38.7 percent to $189.6 million, partly due to certain restructuring expenses in the prior year period. Net income increased $19.3 million to $33 million, which includes premarket tobacco product application (PMTA)-related expenses from the fourth quarter of 2019 through the third quarter of 2020. Adjusted EBITDA increased 34 percent to $90.2 million.
Turning Point Brands has renamed its core business segments from Smoking Products to Zig-Zag Products and Smokeless Products to Stoker’s Products. Historical financial results are not impacted by the segment name change.
“Despite challenges related to Covid-19, our company remained focused on executing our plan throughout 2020 and finished the year strong with tremendous top-line growth in the fourth quarter,” said Larry Wexler, president and CEO, in a statement.
“The year was especially transformational for our Zig-Zag brand as targeted initiatives led to 22 percent growth for the full year as we repositioned it to be our fastest growing segment. Our Stoker’s segment delivered a second consecutive year of double-digit growth driven by incremental share gains in both product lines. Going forward, we expect Zig-Zag and Stoker’s to continue to be the backbone of our organic sales growth.
“NewGen managed to deliver a solid performance despite market disruption around the PMTA application process while creating long-term upside potential through its filed applications. We also had an active year of capital deployment with the acquisition of assets from Durfort as well as investments in the cannabinoid sector in Dosist and Wild Hempettes.
“Most recently, we successfully priced $250 million of senior secured notes, the latest step in the evolution of our capital structure, which gives us increased flexibility to scale the business through additional acquisitions and investments. Capitalizing on our strong momentum and increased liquidity, we expect another strong year in 2021.”
Taat is now being manufactured at a rate of more than 57,000 ten-pack cartons per month, which reflects a 233 percent increase from a production rate of 12 pallets per month to 40 pallets per month as of this week. This increase was prompted by sustained demand for Taat in Ohio as well as anticipated demand from smokers aged 21-plus in other U.S. states who will be able to purchase Taat online directly from the company when its e-commerce portal launches this quarter.
Recent improvements to the company’s processing facility in Las Vegas have enabled Taat to produce a greater volume of Beyond Tobacco, the product’s base material, which is refined in-house using a 14-step process including a patent-pending refinement technique. Additionally, the company has coordinated with its contract manufacturer, who also produces cigarettes for regional and global tobacco brands, to allocate additional production bandwidth to making Taat.
Setti Coscarella
“Now that we are in the ‘execution’ phase on our roadmap to gaining penetration in the $814 billion global tobacco industry, manufacturing our product has become even more crucial to our success so that we can satisfy our proven demand with a consistent supply,” said Setti Coscarella, CEO of Taat Lifestyle & Wellness, in a statement.
“As we continue to place Taat with tobacco retailers in Ohio, and as we prepare to launch the TAAT e-commerce portal this quarter, we have taken proactive steps to ensure a strong supply of TAAT is always on hand to fill orders, with more in the pipeline. More importantly, this has provided us the opportunity to begin forming standard operating procedures for scaling our manufacturing resources even further, which I believe could prove valuable in the near future.”
The global tobacco market size is expected to reach $1.07 billion by 2028, according to a new report by Grand View Research. It is expected to expand at a compound annual growth rate (CAGR) of 1.8 percent from 2021 to 2028.
According to the authors, the shifting preference among youth and the working-class population toward tobacco products, including cigars and next-generation products, is crucial for the market growth. Moreover, growing student spending on tobacco products across the globe is expected to offer new avenues for the growth of the market over the forecast period.
By product, the cigarettes segment held the largest share of more than 75 percent in 2020, according to the report. Easy access to cigarettes at economical prices among the consumers through retail shops is expected to drive this product segment in the near future.
The next-generation products segment is anticipated to be the fastest-growing segment with a CAGR of 2.8 percent from 2021 to 2028. The growing acceptance of next-generation products, including e-cigarettes, in developed economies of North America and Europe is expected to remain a favorable factor for the segment growth.
The Middle East and Africa is anticipated to be the fastest-growing regional market with a CAGR of 3 percent from 2021 to 2028, owing to the increasing demand for premium and next-generation tobacco products with enhanced flavors.
22nd Century Group has developed and launched a technology platform that will enable the company and its strategic partners to quickly identify and incorporate commercially valuable traits of hemp/cannabis plants to create new, stable hemp/cannabis lines. The platform incorporates a suite of proprietary molecular tools and a large library of genomic markers and gene-trait correlations. The platform was developed in collaboration with researchers at KeyGene, a global leader in plant research involving high-value genetic traits and increased crop yields.
“This is a major breakthrough. Quickly and easily identifying the genes responsible for specific traits in a plant is a powerful tool for 22nd Century Group and the hemp/cannabis industry as a whole,” said James A. Mish, chief executive officer of 22nd Century Group, in a statement.
“That is why we are even now beginning discussions to license this platform to strategic partners to help them improve their plant breeding techniques and to optimize their hemp/cannabis cultivars. We continue to make great advancements through our partnership with KeyGene, and this newly developed molecular breeding platform has the potential to result in exponential growth for the company’s revenues and create new value opportunities for our stakeholders, including shareholders.”
“Using traditional breeding techniques, it typically takes at least eight to 10 years to develop new varieties of hemp/cannabis plants that consistently express important traits,” said Juan Sanchez Tamburrino, vice president of research and development at 22nd Century Group.
“Our new molecular breeding platform can dramatically reduce our development time for new high-value varieties of hemp/cannabis and allows 22nd Century scientists to identify plant lines that carry high levels of major therapeutic cannabinoids, such as cannabidiol, cannabichromene and other minor therapeutic cannabinoids like cannabidivarin and tetrahydrocannabivarin.”
Demonstrating how this technology can be used, 22nd Century and KeyGene scientists can now accelerate the selection of specific traits yielding novel cannabinoid profiles. For example, the team was able to select specific markers that predict the gender of hemp/cannabis plants with 99.6 percent accuracy.
Swedish Match posted record sales and operating profit in 2020, finishing the year with top-line growth across all product segments.
Performance was driven by strong traction for ZYN nicotine pouches in the U.S. along with double-digit operating profit growth in local currencies for the smokefree and cigar product segments in both the full year and the fourth quarter, the company said in a press release.
Covid-19-related effects are estimated to have elevated sales and operating profit for the full year as well as in the fourth quarter.
In local currencies, sales increased by 15 percent for the fourth quarter and by 17 percent for the full year. Reported sales increased by 5 percent to SEK4.14 billion ($497.12 million) for the fourth quarter and by 13 percent to SEK16.7 billion for the full year despite significant strengthening of the Swedish krona during the year versus the U.S. dollar, the Norwegian krona and the Brazilian real.
In local currencies, operating profit from product segments increased by 23 percent for the fourth quarter and by 28 percent for the full year. Reported operating profit from product segments increased by 12 percent to SEK1.7 billion for the fourth quarter and by 23 percent to SEK7.16 billion for the full year.
Operating profit amounted to SEK1.65 billion for the fourth quarter and to SEK6.99 billion for the full year. The fourth quarter of 2019 included a non-cash impairment charge of SEK367 million related to the European chewing tobacco business.
Profit after tax amounted to SEK1.24 billion for the fourth quarter and to SEK4.89 billion for the full year. The full year 2020 includes a charge of SEK286 million following an adverse ruling in a tax case.
Lars Dahlgren
Referring to the challenges presented by Covid-19, Swedish Match CEO Lars Dahlgren described 2020 as “a year of adaptability.”
“The success that we experienced in 2020 would not have been possible without the tireless dedication and ingenuity of our employees, the long-forged relationships that we have with our vendors and the continued passion and trust that our customers and consumers place in Swedish Match and its brands,” he said.
Swedish Match’s full financial report is available here.
Pyxus International announced results for its fiscal quarter ended Dec. 31, 2020.
Sales and other operating revenues were $379.6 million for the three months ended Dec. 31, 2020, up from $363.3 million for the three months ended Dec. 31, 2019.
Gross profit as a percent of sales increased to 16.5 percent for the three months ended Dec. 31, 2020, from 15.2 percent for three months ended Dec. 31, 2019.
Net loss improved 62.7 percent to $8.2 million for the three months ended Dec. 31, 2020.
Adjusted EBITDA improved 64.9 percent to $39.9 million for the three months ended Dec. 31, 2020, from $24.2 million for the three months ended Dec. 31, 2019.
Inventory decreased 11.5 percent to $771.8 million as of Dec. 31, 2020.
“Fiscal year 2021 continues to be a year of evolution for our business,” said Pieter Sikkel, Pyxus’ president and CEO, in a statement. “Since the completion of our financial restructuring, we have undergone a strategic review of all business units and categories in which we operate in order to develop a stronger, more streamlined strategy to improve financial performance.”
“We see the potential for increased leaf tobacco volume in fiscal year 2022 from countries including the United States and Brazil. In addition, the developments in the e-liquids category following the September 2020 PMTA submission deadline, paired with increased enforcement of PMTA regulation, provide an encouraging opportunity for potential future growth.”
In January, Pyxus International announced plans to divest its cannabis business in order to focus on its more profitable tobacco and e-liquid businesses.
According to Sikkel, Pyxus International continues to experience Covid-19-related disruption in its supply chain and distribution channels. “While the volume of customer orders is in line with expectations and we have adequate supply of product to meet demand, we have been impacted by procedural delays with regards to fulfillment of customer orders,” he said. “This has resulted in the timing of fulfillment of certain customer orders shifting to the fourth quarter of fiscal year 2021 and others to the first quarter of fiscal year 2022.”
Despite these challenges, the company continues to manage its working capital closely, according to Sikkel. “At Dec. 31, 2020, inventory decreased $100.1 million, or 11.5 percent, to $771.8 million when compared to Dec. 31, 2019,” he said. “Additionally, we expect our uncommitted inventory to be near the midpoint of our stated range of $50 [million] to $150 million by fiscal year end.”
Mark Pawsey MP and Chairman of the APPG for Vaping
Prominent tobacco harm reduction advocates Gerry Stimson (Knowledge-Action-Change), Clive Bates (The Counterfactual), John Dunne (U.K. Vaping Industry Association) and Daniel Pryor (Adam Smith Institute) attended a virtual meeting organized by the U.K. All-Party Parliamentary Group (APPG) for Vaping, a collection of MPs and peers focused on e-cigarettes.
The tobacco harm reduction advocates’ input will be used to advise the U.K. delegation to the Conference of the Parties (COP9) to the World Health Organization’s Framework Convention on Tobacco Control, which is scheduled to take place in the Netherlands this November.
Chaired by Mark Pawsey, the APPG is keen for the U.K. to defend its vaping position internationally and to promote the successes of British vaping. The expert witnesses highlighted the considerable public health benefits of harm reduction tools and the potential benefit they could provide around the world.
Tuesday’s evidence session came as the U.K. government continues its own review of tobacco regulations, meaning a busy time for advocates hoping to protect the public potential of vaping.
“I was happy to accept the invitation from the APPG because the UKVIA believe[s] we have an incredible opportunity to spread the word—that innovative, appropriately regulated vaping industries save lives,” said Dunne in a statement. “Post-Brexit Britain is newly independent in forums like COP9, and it means we can drive this positive message home like never before.”
Philip Morris International (PMI) has appointed Bonin Bough as a member of its board of directors.
Bough is the founder and chief growth officer of growth accelerator Bonin Ventures. He has been chief growth and marketing officer of Sundial Brands (Unilever); television host of CNBC’s “Cleveland Hustles”; chief media and e-commerce officer of Mondelez International; vice president, global media and consumer engagement of Kraft Foods Group; and chief digital officer of PepsiCo.
“It is with great pleasure that we welcome a member of the new generation of digital-first executives to the Philip Morris International board of directors,” said Lucio Noto, PMI’s interim chairman, in a statement. “As we move forward to ‘unsmoke the world,’ an understanding of how to navigate unprecedented societal and commercial change is vital to our success. Bonin Bough brings us a rich background of driving innovation into and through complex organizations.”
