Category: News This Week

  • Ukraine: Activists Decry PMI’s tax privileges

    Ukraine: Activists Decry PMI’s tax privileges

    Photo: Tania

    Activists are urging the Ukrainian government to crack down on international companies still operating in Russia following reports on Philip Morris International’s preferential tax treatment, according to Eureporter.

    Despite being labeled as an “international sponsor of the war,” PMI continues to enjoy a discounted tax rate in Ukraine.  

    After Russia invaded Ukraine in February 2022, many international tobacco companies, including PMI, announced they would retreat from Russia or substantially scale down their operations. In early 2023, however, PMI CEO Jacek Olczak told the Financial Times that negotiations had stalled as the company does not want to sell the business on unfavorable terms for its shareholders.

    Since the start of the war, Russia has made it exceedingly difficult for foreign investors to exit the market without taking a significant financial hit. Among other provisions, the government reserves the right to dictate the valuation of foreign companies’ Russian assets as well as the new owners’ dividend and access to cash flow.

    PMI’s revenue in Russia increased to RUR399.9 billion ($4.33 billion) in 2023 from RUR359.53 billion in 2021, the last fiscal year before the war. The company is among the five largest foreign taxpayers in Russia.

    PMI’s continued presence in Russia prompted Ukraine to designate the company as a war sponsor.

    Despite such considerations, Ukraine levies an ad valorem tax rate of only 12 percent on PMI products—a level that critics say has caused its cash-strapped government to miss out on some UAH100 billion ($2.55 billion) in tax revenues over the decade that the discount has been in place.

    Activists have called on Ukraine to introduce restrictions on tobacco companies that have not left Russia and increase the ad valorem tax rate for the products that these companies sell in Ukraine. They cite the example of Estonia, which in March prohibited the trade of products from international companies still operating in Russia.

  • Airscream to Invest in Malaysia

    Airscream to Invest in Malaysia

    Photo: Airscream

    Airscream UK plans to invest MYR100 million ($21.12 million) in its operations over the next five years and move its headquarters to Malaysia, reports the Business Times.

    The company has already set up administrative, sales and marketing operations as well as a showroom in Shah Alam, with close to 40 employees locally and 100 globally.

    Airscream founder and CEO Sam Ong cited a robust market and vaping industry ecosystem as reasons for the company’s decision.

    Over the past decade, Malaysia’s vaping industry has grown into a MYR3 billion business, providing employment to more than 30,000 Malaysians, according to the Malaysian Vape Chamber of Commerce.

    Ong believes the market is poised for further growth, potentially driving more foreign direct investments into the country and bolstering job creation.

    “We are also encouraged by the passing of the Control of Smoking Products for Public Health Bill 2023, which brings Malaysia on par to other countries around the world, including the U.K., Australia, Thailand and Singapore, which have standalone legislation on tobacco and vape,” Ong was quoted as saying.

    Airscream was established in 2018 as a manufacturer and retailer of the AirsPop vape product.

  • Estrogen May Drive Nicotine Addiction

    Estrogen May Drive Nicotine Addiction

    Researchers discovered that estrogen induces the expression of olfactomedins, proteins that are suppressed by nicotine in key areas of the brain involved in reward and addiction. The research could lead to new targeted therapies that help women control nicotine consumption. (Image: Sally Paus)

    A newly discovered feedback loop involving estrogen may explain why women might become dependent on nicotine more quickly and with less nicotine exposure than men, according to recently published research.

    “Studies show that women have a higher propensity to develop addiction to nicotine than men and are less successful at quitting,” said project lead Sally Pauss, a doctoral student at the University of Kentucky College of Medicine in Lexington, in a statement. “Our work aims to understand what makes women more susceptible to nicotine use disorder to reduce the gender disparity in treating nicotine addiction.”

    The researchers found that the sex hormone estrogen induces the expression of olfactomedins, proteins that are suppressed by nicotine in key areas of the brain involved in reward and addiction. The findings suggest that estrogen–nicotine–olfactomedin interactions could be targeted with therapies to help control nicotine consumption.

    “Our research has the potential to better the lives and health of women struggling with substance use,” she said. “If we can confirm that estrogen drives nicotine seeking and consumption through olfactomedins, we can design drugs that might block that effect by targeting the altered pathways. These drugs would hopefully make it easier for women to quit nicotine.”

    Pauss will present the research at Discover BMB, the annual meeting of the American Society for Biochemistry and Molecular Biology, which will be held March 23–26 in San Antonio, Texas, USA.

  • Phelps to Lead CTP Policy and Partnerships

    Phelps to Lead CTP Policy and Partnerships

    The U.S. Food and Drug Administration’s Center for Tobacco Products has selected Natasha Phelps as the center’s associate director for policy and partnerships. She will assume her new role on May 6.

    Phelps comes to the CTP from The Center for Black Health & Equity, where she served as the director of equity-centered policies. Prior to this, Phelps spent five years at the Public Health Law Center, where she specialized in commercial tobacco law and policy.

    Phelps received her Bachelor of Arts degree in sociology and legal studies from the University of Wisconsin-Madison. She received her law degree from William Mitchell College of Law in St. Paul, Minnesota.

    According to the FDA, Phelps was selected after an extensive nationwide search, multiple interview panels that evaluated a well-qualified applicant pool, and clearance through agency ethics and security processes.

  • Luxembourg to Tax Vapes and Pouches

    Luxembourg to Tax Vapes and Pouches

    Photo: Trevor Parker Photo

    Luxembourg will start taxing e-cigarettes and nicotine pouches in October, reports RTL Today.

    Slated to take effect Oct. 1, the measures are part of a Grand Ducal regulation currently in the process of being drafted. Under this provision, e-liquids will be taxed at €120 ($129.82) per liter while nicotine pouches will incur a tax of €22 per kilo.

    Minister of Health Martine Deprez and Minister of Finance Gilles Roth disclosed this information in response to an inquiry by Member of Parliament Sven Clement of the Pirate Party.

    Luxembourg also plans to start targeting next-generation products through its anti-smoking program. Lawmakers are also mulling price increases for tobacco products, which remain considerably less expensive in Luxembourg than in neighboring countries.

  • Tobacco Production Rising in Mozambique

    Tobacco Production Rising in Mozambique

    Photo: Taco Tuinstra

    Mozambique produced MZN4.48 million ($70,132) worth of tobacco in 2023, up 23 percent from the previous year, reports The Macao News, citing the Ministry of Economy and Finance.

    The value increased despite a drop in volume, which was down 15 percent in the 2022–2023 growing season. Mozambique is the eighth-largest tobacco-growing area globally and the third largest in Africa, with 76,850 hectares dedicated to tobacco, following Zimbabwe (112,700 ha) and Malawi (100,982 ha).

    According to the World Health Organization, Africa saw an increase of 35.7 percent in tobacco leaf production and an increase of 19.8 percent in area under tobacco cultivation from 2005 to 2020, when both were trending down globally.

  • Harpantidis to Lead PMI External Affairs

    Harpantidis to Lead PMI External Affairs

    Photo: PMI

    Philip Morris International has appointed Christos Harpantidis to the position of senior vice president of external affairs effective May 1, 2024. In his new role, Harpantidis will report to the company’s CEO, Jacek Olczak.

    “Christos is an experienced business leader with a proven track record of engaging society on the benefits of tobacco harm reduction and risk-proportionate regulation for smoke-free products,” said Olczak in a statement. “He has been instrumental in building our smoke-free business in Greece and the Southeast Europe area as we evolve away from cigarettes. I’m looking forward to working with Christos and excited to see what opportunities we can unlock as he takes the helm of our external affairs function globally.”

    Since joining PMI in 2003, Harpantidis has held several positions, including setting the commercialization strategy for smoke-free products in Lausanne, Switzerland, and serving as chairman and managing director of Papastratos in Greece. Most recently, he served as area vice president of Southeast Europe. Throughout his career at PMI, he has contributed to growing the company’s smoke-free consumer base, expanding its brand portfolio and advocating for regulations consistent with PMI’s smoke-free ambitions. Prior to joining the company, he worked at Coca-Cola Hellenic. Harpantidis holds a degree in physics from the Aristotle University of Thessaloniki, Greece, as well as master’s degrees in economics and business administration from Kent University in the United Kingdom.

    “Leading our dynamic external affairs function globally is an enormous honor,” said Harpantidis. “I look forward to building on the remarkable progress already achieved by the team, which is resulting in science-based tobacco harm reduction policies being endorsed by more countries.”

    This appointment follows the decision of Gregoire Verdeaux to leave PMI at the end of April to pursue other professional opportunities. During his tenure, Verdeaux expanded the company’s global tobacco harm reduction strategy and, with the team, built compelling policy positions and advocated for regulations consistent with PMI’s smoke-free ambitions.

    “Thanks, in large part, to Gregoire’s efforts, tobacco harm reduction policies are now endorsed by a growing number of countries,” said Olczak. “Under Christos’ leadership, I believe that the external affairs function will ensure that this positive momentum is maintained and further amplified.”

  • Pyxus Retires Debt

    Pyxus Retires Debt

    Photo: Jade

    Pyxus Holdings has signed a repurchase agreement with certain holders of the company’s 8.50 percent senior secured notes due 2027 and its senior secured Pyxus term loans due 2027.

    “We are pleased our strategy has resulted in the growing strength of our operational and financial performance. Combined with our disciplined approach to working capital management, we have realized a significant opportunity to materially reduce our long-term debt,” said Pyxus President and CEO Pieter Sikkel in a statement. “These retirements improve our overall capital structure, directly enable lower annual interest costs and reinforce our ability to pursue ongoing opportunities to lower our cost of borrowing and drive future profitability.”

    Pursuant to the repurchase agreement, as of March 29, 2024, the company will have paid approximately $60 million in cash plus certain customary fees and expenses and accrued and unpaid interest to repurchase from the holders approximately $78 million of aggregate principal amount of the 2027 notes, a 23 percent discount to par value.

    Under the repurchase agreement, the company has also acquired the right, which it expects to exercise at its sole discretion and subject to certain timing and other considerations, to repurchase from the holders up to an additional $34.2 million of aggregate principal amount of the 2027 notes for $26.3 million, at the same discount to par value, and $10.3 million aggregate principal amount of the 2027 loans for $9.1 million, a 12 percent discount to par value.

    All repurchases, including associated accrued and unpaid interest through their respective repurchase dates as well as certain fees and expenses, are expected to be primarily funded from cash on hand.

    In addition to the $122.5 million reduction in aggregate principal amount of long-term debt from these actions, the company expects to retire, at maturity, the remaining outstanding $20.4 million aggregate principal amount of 10 percent senior secured notes due Aug. 24, 2024. As a result of these anticipated actions, the aggregate principal amount of the company’s long-term debt outstanding at $600.6 million as of Dec. 31, 2023, would be reduced by $142.9 million. The annual interest cost reduction associated with this elimination of long-term debt is $12.9 million per year.

  • Short Brazilian Crop Selling Rapidly

    Short Brazilian Crop Selling Rapidly

    More than half of the tobacco produced in southern Brazil had been sold by the middle of March, reports Kohltrade, citing figures released by the growers’ organization Afubra. Driven by a short crop, the average per-kilo price was up nearly 20 percent over that paid during 2022-2024 marketing season.

    According to the Ministry of Development, Industry and Commerce, Brazil shipped 512 million kg of tobacco in 2023, generating $2.73 billion in earnings. In the first two months of 2023, the country exported 75.3 million kg valued at $492.7 million.

    According to information from Emater-RS, tobacco prices reached values above BRL20 ($4.02) per kilo for dry leaf, reaching up to BRL390 per arroba [11.34 kg]  for tobacco classified as BO1 in some regions. However, producers expressed concern about the weight of the leaves, which has been lower than anticipated due to heavy rains during the growing season.

    Reduced volumes and high prices are also accelerating leaf sales. Industry representatives expect sales, which normally extend to the end of June, to end in late April this season.

    Brazil’s tobacco crop has been heavily impacted by the El Nino weather phenomenon this year. When production started in May 2023, the industry expected to harvest 10 percent more  leaf than in the 2022-2023 growing season based on the area planted.

    While the climate conditions initially supported the expectations for a larger crop, heavy rains from mid-July to the end of November forced the industry to adjust its figures downward. Instead of a 10 percent increase, market watchers are now predicting 20 percent drop in volume compared with 2023.

    Rainy growing seasons tend to result in lower nicotine levels. Because this season’s heavy downpours followed three years of drought, which resulted in record high nicotine levels for Brazilian tobacco, there is now an unprecedented gap in the nicotine levels of the 2023 and 2024 harvests, averaging 0.35 percent to 0.5 percent for grades XC to BM, and up to 0.8 percent for grades B and BT.    

    But while nicotine levels have declined, the quality of Brazil’s tobacco is up significantly, with great maturity and a very good aroma. According to Kohltrade, Brazil’s tobacco this year has a very good and intense “flavor,” including in XC grade. Leaf position is showing good quality, and what in previous years was predominantly “LO” to “OF” light orange to orange, this year is “O” orange to “F” full orange or deep orange.

    Overall, the industry expects a small drop in sugar levels.

    With the reduction in volumes, competition has been fierce for Brazil’s 2024 crop. All companies are rushing to buy their volumes and serve their customers, greatly inflating the market and accelerating the process of purchasing tobacco.

  • Zim Growers Worried About Price Fixing

    Zim Growers Worried About Price Fixing

    Photo: Taco Tuinstra

    Tobacco growers in Zimbabwe have voiced concern over tobacco leaf prices at the auction floors, which have capped out at $4.99 per kilogram compared to around $6 per kilogram on the contract floors, reports NewsDay. Growers are worried about buyer collusion.

    “The season is progressing reasonably well, even though we have raised concern about the $4.99 cap, which is on the auction system, and for us, it’s a kind of a sign of collusion, which is worrisome,” Zimbabwe Tobacco Growers Association President George Seremwe said. “We cannot have the auction system offering lower prices than the contract.”

    “The contract has gone up to $6.90, and for us, there is a discord,” Seremwe said. “The same buyers who are buying at the auction are the same buyers who are also buying at the contract.

    “So that’s why we suspect there’s collusion. We would want the prices to go up because if you look at the production cost, it was quite high.”

    Tobacco growing will not be sustainable for the farmers due to poor auction floor prices, according to Seremwe. “So, the growth of tobacco has to be attractive by the prices. We know the price world over has gone up, so we also expect the prices to go up than what is currently prevailing on the market,” he said.

    “We talk of sustainability of the farmer. As farmers, we think it is not sustainable at the moment.”

    Farmers expected the prices to be better compared to last year, said Shadreck Makombe, president of the Zimbabwe Commercial Farmers’ Union. “The prices are not yet at what we would have expected,” Makombe said. “We would have expected a few coins up.”

    “Again, it’s the only start of the marketing season, [and] most of the tobacco being sold there is primary leaf tobacco, not quite what we want,” he said. “We expect the prices to firm up or to increase for the farmers to get anything meaningful from their crop.”