Category: Financial

  • Sales Down at Scandinavian Tobacco

    Sales Down at Scandinavian Tobacco

    Niels Frederiksen | Photo: STG

    Scandinavian Tobacco Group (STG) delivered 3.9 percent negative net sales growth, an EBITDA margin of 26.5 percent and a free cash flow before acquisitions of DKK622 million ($89.36 million) for the third quarter of 2023. For the first nine months of 2023, net sales decreased by 1.8 percent to DKK6.5 billion, the EBITDA margin was 24.6 percent and the free cash flow before acquisitions was positive by DKK602 million.

    Consumer trends for the cigar categories remained unchanged throughout the third quarter, according to STG. Decreasing volumes were partly offset by pricing and increasing sales from growth enablers, such as retail stores, next-generation products and international sales of handmade cigars.

    STG anticipates net sales growth to recover in the fourth quarter, primarily as a result of the positive trend in North America online and retail, along with growth in Europe and comparison to a soft fourth quarter last year. The EBITDA margin is expected to be somewhat lower than in the fourth quarter last year as a result of category and country mix combined with higher investments in the growth enablers and in stabilizing the market share development in Europe branded. The main uncertainties to the full-year expectations remain the volume development in Europe branded and inventory adjustments with customers in the U.S.  

    STG’s board of directors has approved a share buyback program of up to DKK850 million running to the end of February 2025. “With the performance in the third quarter, we are on track to deliver on our revised guidance from August with both cash flow and margin recovering in the quarter,” said CEO Niels Frederiksen in a statement.

    “Although key uncertainties persist, we continue to make good progress in the online business, and the growth enablers are also performing well. Whereas the market share for Europe branded continued to decline, we remain confident that the more aggressive initiatives launched over the past few months will support a stabilization.”

  • Malawi Devalues

    Malawi Devalues

    Photo: Africa

    Malawi is devaluing the kwacha’s by one third.

    In a notice to authorized dealer banks seen by Reuters, the country’s central bank said the kwacha’s exchange rate to the U.S. dollar would be adjusted to MKW1,700 from MKW1,180.

    The southern African country has been struggling with dwindling foreign currency reserves due in part to declining revenue from tobacco exports.

    Malawi earned $282.62 million from tobacco sales during the 2023 marketing season. While this figure was up substantially from the $182.12 million generated by sales of the golden leaf in the previous season, it is not nearly enough to alleviate the nation’s trade imbalance.

    In 2020, Malawi’s import bill was $2.8 billion, versus exports of only $800 million, according to the National Statistics Office.

    Depending on the season, tobacco accounts for between 40 percent and 70 percent of Malawi’s export earnings. To reduce its heavy reliance on a single commodity, the country has been working to diversify its economy by developing supplemental value chains, such as mushrooms, bananas and groundnuts.

  • TPB Quarter In Line With Expectations

    TPB Quarter In Line With Expectations

    Photo: MIND AND I

    Turning Point Brands (TPB) reported net sales of $101.72 million in the three months that ended Sept. 30, down from $107.8 million in the comparable quarter of 2022. Net income was $10.83 million, compared with $11.54 million in the prior-year quarter.

    “Our third quarter results were consistent with our expectations,” said TPB President and CEO Graham Purdy in a statement.

    “The Zig-Zag segment was stable sequentially from the second quarter and notwithstanding some transitory headwinds posted its third-highest revenue quarter. Stoker’s had another solid quarter of performance led by double-digit growth year-over-year in Stoker’s MST. We further de-levered the balance sheet with an opportunistic purchase of $15 million in aggregate principal amount of our convertible notes during the third quarter.

    “With a new $75 million ABL revolving credit facility, our strong cash balance and our free cash flow generation, we now have more than ample liquidity to address the remaining balance of convertible notes maturing next year.”

  • WSJ: Tobacco Firms Losing Pricing Power

    WSJ: Tobacco Firms Losing Pricing Power

    Photo: darren415

    A combination of inflation and shifting smoking habits is making it more difficult for tobacco companies to offset declining cigarette volumes with higher prices, according to an article in The Wall Street Journal.

    According to the paper, one of the attractions of investing in tobacco stocks has been cigarette manufacturers seemingly unlimited ability continuously grow their profits through price hikes even as overall cigarette sales are in long-term decline.

    The recent higher-than-expected U.S. volume declines are increasingly testing that strategy, however. Over the three months through September, U.S. cigarette sales fell 8 percent year-on—almost double the long-term average.

    Altria Group suspects many smokers have been migrating to illegal disposable vapes, the market for which has grown by one fifth recently. In October, the cigarette manufacturer announced “sweeping litigation” against 34 manufacturers, distributors and online retailers of illicit disposable e-vapor products that are unlawfully marketed and sold in California and other U.S. states.

    Stronger against illicit vapes by the Food and Drug Administration could potentially stabilize cigarette volumes.

    In addition to competition from illicit vapes, premium brands such as Marlboro face additional pressures as inflation makes consumers more price sensitive. Smaller brands offering discounts have been gaining market share, with a 15 percent increase in sales of the cheapest cigarettes over the past year.

    At a national average of $8.77-a-pack including taxes, Marlboro is now 43 percent more expensive than cheaper rivals, according to Altria data, compared with 31 percent five years ago. 

    One of the beneficiaries of downtrading has been Vector group, whose Montego brand is now the biggest discount cigarette in America.

    Despite the pressures, The Wall Street Journal believes it is unlikely that Altria will take dramatic actions. Thirty years ago, the company cut the cost of Marlboros by 20 percent to close a gap that had opened between it and cheaper brands.

    Traumatized investors sold their shares in the company en masse in an event that became known as “Marlboro Friday.”

  • Imperial’s Performance ‘in Line With Guidance’

    Imperial’s Performance ‘in Line With Guidance’

    Photo: Igor Golovnyev

    Imperial Brands is on track to deliver in line with its previous full-year guidance, the company announced in a trading update. On a constant currency basis and including Russia in the comparable prior-year period, the company expects tobacco and NGP net revenue growth in the low single digits and group adjusted operating profit growth to accelerate to the lower end of its mid-single-digit range. (Imperial Brands transferred its Russian business to local investors in April 2022.)

    At current rates, the company anticipates foreign exchange rates to provide a boost of approximately 2 percent to its full-year net revenue and adjusted operating profit.

    “Focused investment in our priority combustible markets is expected to deliver a further modest gain in the aggregate share for our top 5 markets at the full year,” the company wrote in its update. “This will complete three consecutive years of improved market share performance following several years of decline.

    Imperial expects market share growth in the U.S., Spain and Australia to offset declines in Germany and the U.K. “This positive aggregate share performance has been achieved while delivering strong pricing across all five markets and reflects the strengthened equity of our brands and our improved resilience as a result of our recent targeted investments,” Imperial wrote.

    “As anticipated, at constant currency, our tobacco net revenue growth improved in the second half of the year as continued strong pricing helped to offset the relatively higher volume declines against historic averages.

    “Tobacco net revenue growth has remained strong in Europe and the AAACE region, more than offsetting declines in the U.S. Our U.S. cigarette business has outperformed with continued growth in cigarette net revenue, although, as expected, this has been more than offset by a decline in mass market cigar net revenue against a strong comparator period.”

    Imperial Brands’ full-year NGP revenue growth accelerated in the second half of the year, driven by strong growth in Europe.

    In its trading update, Imperial also announced a further £1.1 billion ($1.36 billion) share buyback for fiscal 2024, a 10 percent increase on the £1.0 billion buyback in fiscal year 2023.

    Imperial will announce its full-year results on Nov. 14.

  • Revenues Down, Loss Up for 22nd Century

    Revenues Down, Loss Up for 22nd Century

    Image: Tobacco Reporter archive

    22nd Century Group reported net revenues of $17.81 million in the three months that ended Sept. 30, 2023, down from $19.38 million in the comparable 2022 quarter. Net loss was $72.72 million against a net loss of $13.1 million in the third quarter of 2022.

    “In the third quarter, our VLN footprint expanded from approximately 1,100 stores in 14 states as of June 30, 2023, to over 4,550 stores spanning 19 states. This includes the recent expansion of more than 400 stores in Florida with a leading national convenience store chain that has prior experience in VLN sales across other states,” said 22nd Century Group CEO John Miller in a statement.

    “We also initiated sales in our first nationwide drug store chain, thereby conducting sales trials in five states and diversifying the range of channels through which our products are accessible. However, our dynamic store count growth did not translate into immediate revenue. Sales of VLN were modest in the quarter as the brand is still largely unknown to our target market, and our marketing capabilities are limited given our current financial condition.”

    On Sept. 5, 2023, the company announced its intent to explore strategic alternatives in an effort to maximize shareholder value. While the initial focus was primarily on 22nd Century’s tobacco portfolio, the company subsequently received indications of interest regarding its other assets in addition to tobacco.

    In October, the company reduced the outstanding principal of its senior secured credit facility from approximately $22.1 million to approximately $14 million.

  • Universal’s Income Jumps 30 Percent

    Universal’s Income Jumps 30 Percent

    Photo: Tobacco Reporter archive

    Universal reported sales and other operating revenue of $1.16 billion for the six months that ended Sept. 30, up 7 percent over that posted for the comparable 2022 period. Operating income jumped 30 percent to $66.3 million.

    Universal Chairman, President and CEO George C. Freeman III expressed satisfaction with the results. “Our Tobacco Operations segment delivered strong performance in the first half of fiscal year 2024,” he said in a statement.

    According to Freeman, Universal benefited from robust demand for leaf tobacco and a favorable tobacco product mix. Leaf tobacco margins improved in the first half of fiscal year 2024, despite lower leaf tobacco sales volumes, as the company had fewer shipments of lower margin tobacco compared to the first half of fiscal year 2023.

    Segment operating income for Universal’s tobacco operations segment was up 46 percent compared with the previous year’s six-month period. Uncommitted tobacco inventory levels of 12 percent at Sept. 30, 2023, remained low, and global leaf tobacco supply continues to be tight for all types of tobacco, according to Freeman.

    “Looking ahead, we continue to expect that, similar to fiscal year 2023, our tobacco shipments will be strongly weighted to the second half of the fiscal year 2024,” he said. “We also believe our uncommitted tobacco inventory levels will remain low for the rest of fiscal year 2024.”

  • Tobacco Income Up at Vector

    Tobacco Income Up at Vector

    Image: Vadym

    Vector Group announced financial results for the three months and nine months ended Sept. 30, 2023.

    Consolidated revenues for the third quarter were $364.1 million, down 3.7 percent, or $13.9 million, compared to the prior year period.

    The tobacco segment wholesale market share declined to 5.3 percent from 5.7 percent in the prior year period, and retail market share increased to 5.9 percent from 5.7 percent in the prior year period.

    Montego wholesale market share increased to 3.5 percent from 2.8 percent in the prior year period, and retail market share increased to 3.8 percent from 2.8 percent in the prior year period.

    Operating income was $90.5 million, up 7.9 percent, or $6.6 million, compared to the prior year period.

    Tobacco segment operating income was $94.8 million, up 7.6 percent, or $6.7 million, compared to the prior year period.

    Adjusted EBITDA was $94.9 million, up 8.8 percent, or $7.7 million, compared to the prior year period. Tobacco Adjusted EBITDA was $96.3 million, up 7.4 percent, or $6.7 million, compared to the prior year period.

    Year-to-date consolidated revenues were $1.06 billion, down 1.2 percent, or $13.3 million, compared to the prior year period. Tobacco segment revenues were $1.06 billion, up 0.2 percent, or $2.6 million, compared to the prior year period. Tobacco segment wholesale and retail market share increased to 5.5 percent and 5.8 percent from 5.4 percent and 5.4 percent, respectively, in the prior year period.

    Year-to-date Montego wholesale market share increased to 3.4 percent from 2.4 percent in the prior year period, and retail market share increased to 3.6 percent from 2.4 percent in the prior year period. Operating income was $236.4 million, down 5.3 percent, or $13.3 million, compared to the prior year period. Tobacco segment operating income was $248.5 million, down 2.2 percent, or $5.5 million, compared to the prior year period. Adjusted EBITDA was $267.1 million, up 2.9 percent, or $7.6 million, compared to the prior year period. Tobacco adjusted EBITDA was $271.0 million, up 5.6 percent, or $14.4 million, compared to the prior year period.

    Tobacco segment wholesale and retail market share increased to 5.5 percent and 5.8 percent from 5.1 percent and 5.2 percent, respectively, in the last 12 months ended Sept. 30, 2022.

    Montego wholesale and retail market share increased to 3.3 percent and 3.5 percent from 2 percent and 2 percent, respectively, in the last 12 months ended Sept. 30, 2022.

    “We are proud that Montego grew to be the largest discount brand in the United States in the third quarter of 2023, demonstrating the strength of our strategy and the skillful execution by Liggett to offer the best value proposition in the U.S. cigarette industry,” said Howard M. Lorber, president and CEO of Vector Group, in a statement. “As Liggett continues to outperform the market, we remain focused on optimizing long-term profit and driving value for stockholders by effectively managing its volume, pricing and market share.”

  • JT Ups Forecast on Strong Quarter

    JT Ups Forecast on Strong Quarter

    Photo: JT Group

    The JT Group reported revenue of ¥2.16 trillion ($14.29 billion) in the third quarter of 2023, up 7.4 percent over the comparable 2022 quarter. At constant currency exchange rates, core revenue increased 5.9 percent to ¥2.05 trillion. Adjusted operating profit at constant exchange rates jumped 5.9 percent to ¥675.5 billion. On a reported basis, the adjusted operating profit was ¥664.4 billion, up 4.2 percent from the 2022 quarter.

    “The JT Group posted another set of strong results for the third quarter. In particular, the tobacco business reported solid growth across its indicators, driven by continued market share gains and robust pricing,” said JT Group President and CEO Masamichi Terabatake in a statement.

    “We are accelerating investments in HTS to establish the foundation of our future growth, and these investments are progressing as planned. The market share of Ploom X in the HTS segment in Japan is steadily increasing with share exceeding 10 percent in the periods of July to September 2023, despite a competitive business environment.

    “In addition, since July 2023, we have launched Ploom X in Switzerland, Poland, Hungary, Romania and Greece, and plan to roll it out in Kazakhstan in early November. We expect to continue the geographical expansion of Ploom X, to reach 28 markets by year end 2024.

    The JT Group increased its full-year forecast for adjusted operating profit at constant currency by ¥34 billion to account for the stronger year-to-date top-line growth of the tobacco business.

  • Altria Revenues Down 4.1 Percent

    Altria Revenues Down 4.1 Percent

    Photo: Phimwilai

    Altria Group reported net revenues of $6.28 billion in the third quarter of 2023, down 4.1 percent from the comparable 2022 quarter. The decrease was driven primarily by lower net revenues in the company’s smokeable products segment.

    Altria’s domestic cigarette shipment volume decreased 11.6 percent from quarter to quarter, driven by the industry’s overall decline rate, retail share losses, calendar differences and trade inventory movements, among other factors.

    Following the completion of its Njoy Holdings acquisition on June 1, 2023, Altria has been strengthening Njoy’s global supply chain to support the anticipated volume increase associated with its expansion plans for the Njoy Ace brand.

    The company shipped 7.5 million Ace pods during the quarter. The retail share of Ace pods in U.S. muti-outlet and convenience stores was essentially unchanged since the completion of the Njoy transaction.

    The U.S. cigarette retail share of Altria’s Marlboro brand dropped 0.3 points, to 42.3 percent versus the prior-year quarter, primary due to increased macroeconomic pressures on disposable income and increased competitive activity.

    Net revenues in the oral tobacco products segment increased 2.2 percent, driven by higher pricing and lower promotional investments.

    “Our highly profitable traditional tobacco businesses were resilient in a dynamic operating environment during the third quarter and first nine months, providing fuel for our business transformation and significant cash returns to our shareholders,” said Altria CEO Billy Gifford in a statement.

    “I believe we have the appropriate strategies and people in place to execute our growth plans. I continue to believe that we can achieve our vision and create long-term value for our shareholders.”