Category: Financial

Imperial on Track to Meet Expectations

Photo: MIND AND I
Imperial Brands expects its group net revenue to grow by around 1 percent on an organic constant currency basis for fiscal year 2021, the company revealed in a pre-close trading update ahead of its annual results announcement on Nov. 16.
“We have made good progress in implementing our strategy through a sharper management focus, greater investment behind our priority combustible tobacco markets and new market trials in heated-tobacco and vapor,” said Imperial Brands’ CEO. “We are building a high-performance culture with the introduction of new more consumer-focused ways of working and have made a significant number of new hires to enhance our capabilities in key areas. I am pleased to report the business continues to perform well and we remain on track to deliver our full-year results in line with expectations.”
In Imperial Brands’ combustible cigarette business, greater focus on the company’s five priority markets is beginning to stabilize the long-term aggregate market share performances in these markets with share expected to be slightly lower by around 2–3 basis points compared with a 17 basis point decline in the prior year. The company is stepping up its investment behind its strategic initiatives in each of these priority markets to drive performance improvements. Overall tobacco volumes are in line with expectations, and total group cigarette market share is expected to grow by about 20 basis points. The net effect of the Covid-19 travel restrictions and changes in consumer buying patterns have been a small mix benefit, according to Imperial Brands, although this is beginning to reduce as restrictions are lifted and is likely to unwind further in fiscal year 2022.

We have made progress in implementing our strategy through a sharper management focus, greater investment behind our priority combustible tobacco markets and market trials in heated-tobacco and vapor.
Stefan Bomhard, CEO, Imperial Brands
In next-generation products (NGP), Imperial Brands expects its second-half revenue to be at a similar level to the first half, reflecting the impact of market exits as the company focuses on the categories and markets with the best potential for sustainable growth. The company has taken steps this year to strengthen its capabilities and performance to create a solid foundation for future growth. In line with this strategy, it has launched market trials for its heated-tobacco proposition in the Czech Republic and Greece as well as a trial of an improved consumer marketing proposition for its vapor product, blu, in Charlotte, North Carolina, USA. The company says it will be monitoring the consumer response to these trials over the coming months and will update on progress during 2022.
Group adjusted organic operating profit growth is expected to be in line with Imperial Brands’ guidance of low to mid-single digit constant currency growth, reflecting significantly reduced losses in NGP and increased distribution profit. “The tobacco business has performed well, although adjusted operating profit will be slightly lower than last year, as previously guided, as a result of the planned increased investment to support our strategic plan as well as lower stock revenue/profit in Australia (about £90 million) and U.S. state litigation settlement costs (about £50 million),” the company wrote in its trading update.
October 6, 2021
BAT to Engage on Executive Pay

Photo: BAT
BAT will be engaging with its shareholders to better understand their perspectives on the management of executive pay, the company announced in a press note.
At the company’s, annual general meeting on April 28, 2021, significant minorities voted against resolutions dealing with directors’ remuneration and authority to allot shares.
Nearly 40 percent of shareholders voted against Resolution 2—Directors’ Remuneration Report. “Whilst we note that the decisions taken by the remuneration committee have been supported by the majority of our shareholders, we do recognize that a significant minority of shareholders and some shareholder advisory bodies have not been supportive of these decisions, in particular, fixed pay increases awarded to executives in 2020 and 2021,” BAT wrote. “This has been taken on board by the committee, and we are committed to achieving a greater understanding of the underlying reasons that have seen some of our shareholders being unable to support the resolution.”
During the annual general meeting, 27.67 percent of participants voted against Resolution 16—Renewal of Directors’ Authority to Allot Shares. “Through our shareholder engagement, the board is aware that there is a divergence between prevailing U.K. market practice for FTSE companies to retain an authority to allot in line with the IA share capital management guidelines and governance policies maintained by certain overseas investors, which either do not support a general allotment authority or only support a general authority at lower levels,” BAT wrote.
“Whilst we recognize that some shareholders are unable to support an allotment authority at the level sought, we note this level of authority continues to be supported by the majority of our shareholders and is in line with prevailing U.K. market practice. Although there is no present intention to exercise this authority, we continue to consider that this level of authority is appropriate to maintain flexibility for the company.
“We will maintain dialogue with shareholders for which this authority continues to present concerns and will keep best practice in this area under review.”
October 6, 2021
Taat Reports Increased Loss on Record Revenue

Photo: Taat Global Alternatives
Taat Global Alternatives reported a net loss of CAD7.74 million ($6.15 million) on sales of CAD1.31 million in the third quarter of 2021. In the comparable period of 2020, the company registered a loss of CAD3.75 million on sales of CAD63,481. Gross revenue increased by 1,956 percent from the same period in the prior year.
The company attributes the increase in net loss to increased marketing efforts relating to the advertising of its product in sporting events.
Throughout the third quarter of 2021, the company continued the rollout of its flagship product, Taat, in the United States as a nicotine-free and tobacco-free alternative to tobacco cigarettes. Based on early-stage success at retail in Ohio and through e-commerce across the United States, the popularity of Taat continued to grow among smokers as well as retailers of tobacco products and their respective wholesale/distribution partners, according to Taat Global Alternatives.
Our growth has accelerated this quarter as we continued to build the popularity of Taat among smokers aged 21-plus,” said Taat CEO Setti Coscarella in a statement.
“We have undertaken aggressive strategies to market Taat in this consumer segment in order to sustain and grow interest in the United States by continuing to add stores to expand our sales pipeline. Establishing a reputable and well-known brand comes with the long-term benefit of laying the groundwork to introduce Taat to new global markets.”
During the final week of September 2021, the first overseas shipment of Taat arrived in London for distribution in the United Kingdom and Ireland. Management of Taat anticipates that the existing brand presence will launch the commercialization of Taat in these new markets as the company continues to grow its sales footprint in the United States.
October 5, 2021
Kate Wang Resigns from RLX Audit Committee

Photo: RLX Technology
RLX Technology founder Ying (Kate) Wang has resigned as a member of the audit committee of the company’s board of directors to help RLX comply with the relevant New York Stock Exchange’s listing requirements on audit committees’ independence.
Going forward, the audit committee will be composed entirely of independent directors—Zhenjing Zhu and Youmin Xi—RLX technology announced in press note.
October 5, 2021
PMI Closes Business Transformation Credit

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Philip Morris International has entered into an agreement for its first financing instrument following the issuance of its August 2021 Business Transformation-Linked Financing Framework. The new revolving credit facility provides for borrowings up to an aggregate principal amount of $2.5 billion and expires on Sept. 29, 2026, unless extended as per the terms of the credit agreement.
“We are pleased with the broad engagement and support of lenders for our first business transformation-linked financing instrument,” said Emmanuel Babeau, chief financial officer at PMI. “This credit facility further reinforces our industry-leading transformation and our commitment to accelerate the end of smoking and to use our strong capabilities to develop products that go beyond nicotine and have a net positive impact on society.”
Consistent with the company’s framework, the facility includes business transformation-linked pricing adjustments based on progress on two of PMI’s most ambitious and strategic business transformation metrics: PMI’s smoke-free/total net revenue percentage and the number of markets where PMI’s smoke-free products are available for sale. The adjustments may result in the reduction or increase in both the interest rate and commitment fee under the credit agreement if PMI achieves, or fails to achieve, certain specified targets.

This credit facility further reinforces our industry-leading transformation and our commitment to accelerate the end of smoking.
Emmanuel Babeau, chief financial officer, PMI
“Investors, lenders and other stakeholders can play an important role in driving change by encouraging and supporting companies that are committed to transform and improve their impact on society,” said Jennifer Motles, chief sustainability officer, in a statement. “We look forward to continued engagement with our stakeholders in order to further accelerate our smoke-free transformation and set an example for other companies, both inside and outside our industry.”
The facility replaces PMI’s existing $3.5 billion revolving credit facility, which was set to expire on Oct. 1, 2022, and was terminated effective Sept. 29, 2021.
October 1, 2021
A Paradigm Shift

Photo: BAT
Contributed
For years, smokers weren’t interested in supposedly safer cigarettes. There were some attempts by R.J. Reynolds in the 1990s with a “heated not burned” cigarette in the U.S. (under the brand name Eclipse), Germany (HI.Q), Sweden (Inside) and Japan (Airs). But the time seemingly wasn’t ripe for novel products.
Instead, the tobacco industry entered an era of consolidation, the majors embarking on a large acquisition spree to expand their sales and distribution reach and to build on the popularity of global brands. The alcohol companies followed a similar strategy. The one exception was Swedish Match, which sold off of its cigarette interests to prioritize less harmful snus. That was before the EU decided to impose a ban on the product.
The emergence of vaping technology, alongside the continuing focus on the health impact of smoking and an increase in regulatory restrictions saw the arrival of startup companies like Blu, Ploom (now Juul), NJOY, E-Lites and Ruyan. These businesses were at the forefront of starting what Swedish Match originally envisaged—a widespread transition for smokers from tobacco to alternative nicotine-delivery products.
The tobacco majors stood briefly on the sidelines but quickly began acquiring many of these businesses and renewing their investments in the previously trialed heated-tobacco technologies. Philip Morris International led the way, soon publicly proclaiming its intentions for a “smoke-free future” and committing to transition smokers to less harmful products. Indeed, PMI’s latest acquisitions in the pharmaceutical sector, including those of OtiTopic, Vectura and Fertin Pharma, are intended to transition their business even beyond the nicotine segment.
But prevailing public perceptions of the tobacco industry are slow to change, and with increasing attention on environmental, social and governance (ESG) issues, many investors have taken a restrictive approach toward tobacco stocks. Whether or not compounded by the disruptive threat of new challenger technologies, tobacco stocks have shed circa $300 billion over the past five years. This is despite the industry’s history of paying generous dividends, which in theory should attract investors. Similarities with “stranded assets” in the oil, gas and coal-mining industries immediately come to mind.
There is already a noticeable difference in valuations between faster and slower transitioning tobacco companies, skewered in favor of the more active ones. The meteoric rise of Juul (albeit one that has now somewhat deflated) and the explosive valuations afforded to the likes of Smoore and RELX are also indicative of where investors see the future value in nicotine businesses.
Increasing public health concerns and huge consumer demand for harm reduction products, set against a complex regulatory landscape, fuel the reduced-risk product (RRP) categories.
PMI, Altria and BAT are prominent in outlining their significant investment in and commitment to a portfolio of RRPs and their plans to transition smokers away from combustible products. While Japan Tobacco may have appeared to prioritize combustibles, recent developments suggest an intention to increase its presence in the RRP category too. Imperial Brands, while still undergoing a change in the senior management team, is following a similar strategy.
Tobacco companies are increasingly becoming lifestyle companies with broad product offerings but streamlined brand portfolios.
Although not widely commented on, this development and the plans that the tobacco majors seemingly have for the RRP category will have significant consequences for a number of industry participants, not least tobacco leaf growers. Prominent tobacco-producing nations, such as Malawi and Zimbabwe, will therefore face significant challenges and will likely need to restructure their entire economies.
As a result of these developments, tobacco companies are increasingly becoming lifestyle companies with broad product offerings but streamlined brand portfolios. PMI is the most ambitious, trying to converge lifestyle and pharmaceutical categories focusing on inhalation technologies, benefiting from PMI’s expertise in this area. However, the acquisition of U.K.-based Vectura met with protests. On the other hand, PMI’s acquisition of OtiTopic, a U.S. respiratory drug delivery development company did not trigger such a strong public outcry. While Japan Tobacco has long had a pharmaceutical division, no areas of overlap or corresponding synergies with the tobacco business have been made apparent.
The entrepreneurial small-size and mid-size enterprises, who kickstarted the vaping industry from the grassroots, initiated the transition we’ve seen in the last 10 years. At the outset, public health and tobacco control activists in many countries considered grassroots vaping companies to be a welcome alternative to the large tobacco multinationals. The majority of those early vaping companies were preoccupied with product launch, sales and distribution and overlooked the importance of the public policy and regulatory arena. Many, such as Blu, Ploom, E-Lites, Logic and Juul, then accepted tobacco industry investment, but this led to a negative view toward the category for many in public health and tobacco control.
Seemingly the stigma associated with the tobacco industry—the “Big Tobacco” factor—quickly attached itself to the vaping industry.
It seems only a matter of time before history repeats itself in the cannabis industry. Altria, BAT, PMI and Imperial Brands have all made investments in cannabis. Whether a preemptive step or not, it’s certainly a cost-effective manner to understand the sector and thereby be positioned to participate as and when restrictions come to be lifted.
Only a few years ago, the tobacco industry was considered to be a dinosaur set for extinction. Some industry participants, whether encouraged by early successes of vaping businesses or otherwise, took on the challenge and are reinventing themselves as lifestyle companies, and PMI is daringly entering the pharmaceutical sector. Those that are prepared to transition away from combustible tobacco products have been given a new and exciting line of life.
The tobacco industry is only at the beginning of its paradigm shift. Special efforts to engage with regulators—which are not only the industry’s biggest partner but will ultimately decide on the success of the “new nicotine” sector—will be required. It seems likely that those industry players who make those efforts and who experiment with new technologies, new products and new business models will be those best placed to thrive in the future.
This article was contributed by GMTL, a leading risk advisory, due diligence and corporate intelligence firm headquartered in London.
October 1, 2021
PMI Reaffirms Full-Year Guidance

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Philip Morris International reaffirmed the company’s 2021 full-year reported diluted earnings per share forecast range of $5.76 to $5.86.
Speaking at the Barclays Global Consumer Staples Conference, PMI CEO Jacek Olczak said the company remained on track for an excellent performance in 2021 underpinned by better combustible volumes and continued strong demand for IQOS. “We are today reaffirming our full-year EPS forecast and now expect to be toward the upper end of our 12 percent to 14 percent organic growth range,” he told investors.
Even as the current global shortage of semiconductors limits PMI’s ability to realize the full potential of IQOS, the underlying momentum of the brand is clear, said Olczak, citing the positive early results for IQOS Iluma in Japan following the launch last month.
At the same time, PMI cautioned that the ongoing global semiconductor shortage could reduce device assortment and availability impacting IQOS user acquisition and the timing of second-half 2021 Iluma launches in certain markets. As a result, full-year 2021 heated-tobacco unit shipment volume could be toward the lower end of the 95 billion to 100 billion unit range, if shortages persist, with third-quarter heated-tobacco unit shipment volume of 23 million to 24 billion units.
An archived copy of the Barclay’s presentation and Q&A session will be available at http://www.pmi.com/2021barclays%20 until Oct. 7, 2021.
September 8, 2021
Smok Parent Considers Initial Public Offering

Photo: Tobacco Reporter archive
Shenzhen IVPS Technology Co. is considering an initial public offering in Hong Kong as soon as next year, reports Bloomberg, citing sources with knowledge of the matter.
The vaping device company could raise between $500 million and $1 billion, the people said.
Founded in 2010, IVPS makes vaping kits under its Smok brand. The devices are used by more than 80 million consumers globally and are sold online as well as via distributors in countries such as France, Kuwait and the U.K.
The Chinese e-cigarette industry has been under mounting pressure in its domestic market. In March, China’s Ministry of Industry and Information Technology proposed a draft regulation that would apply the same rules for the conventional tobacco industry to the e-cigarette sector. The aim is to regulate production and marketing of new types of tobacco products and prevent false advertising and quality issues, the ministry said.
In 2019, Beijing banned online sales of e-cigarettes.
Shares of several Chinese e-cigarette companies plunged following the draft’s release in March. Hong Kong-listed device maker Smoore International Holdings’ shares are down about 40 percent this year.
While rising regulatory scrutiny of the vaping industry could impact investor appetite for listings in the sector, IVPS could be less affected because it makes the device rather than the e-cigarette liquid.
August 24, 2021
RLX Growth Slows Amid Regulatory Uncertainty

Photo: RLX Technology
RLX Technology revenue slowed in the second quarter of 2020 amid uncertainty about the regulatory environment in China.
Net revenues were RMB2.54 billion ($393.6 million), representing an increase of 6 percent from RMB2.4 billion in the first quarter of 2021. The improvement was due primarily to an increase in net revenues from sales to offline distributors, which was mainly attributable to the expansion of the company’s distribution and retail network.
The company believes that the slowdown in quarterly sequential revenue growth was due primarily to external factors, including negative publicity on the vapor industry in the latter half of the second quarter, coupled with the fact that the draft new rules for vapor products announced by China on March 22, 2021, have not been formally confirmed and no new implementation details had been revealed, which had an adverse impact on sales.
The company is also target of a lawsuit by investors who claim RLX Technology overstated its financials and misrepresented potential regulatory risks when it filed the paperwork for its initial public offering in the U.S.
Gross margin was 45.1 percent compared to 46 percent in the first quarter of 2021.
“In the second quarter of 2021, our business continued to develop as we increased our efforts to further improve underage protection and product safety,” said Ying (Kate) Wang, co-founder, chairperson of the board of directors and CEO of RLX Technology, in a statement. “With our strategic focus on technology investment and brand building, we strive to make RELX a trusted brand for adult smokers with state-of-the-art products, industry-leading technologies and scientific advances. Going forward, we will further enhance investments in scientific research, strengthen our distribution and retail network, and improve our supply chain and production capabilities to create more value for our users and shareholders alike.”
RLX hosted an earnings conference call on Aug. 20, 2021. A live and archived webcast of the conference call is available on the company’s investor relations website. A replay of the conference call will be accessible until Aug. 27, 2021.
August 23, 2021
VPR Brands Reports ‘Turnaround’ in Quarter

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VPR Brands, a supplier of vaporizers, reported revenues of $1.7 million for the second quarter of 2021, up from $1.2 million in the comparable 2020 quarter.
The increase was a result of the Covid-19 pandemic, which hampered sales significantly in 2020 and increased direct online sales in 2021.
Operating expenses for the three months ended June 30, 2021, were $457,895, compared to $372,652 for the three months ended June 30, 2020. The increase in expenses is primarily due to increased sales activity in 2021.
Revenue for the six months ended June 30, 2021, was $2.96 million, compared with $1.8 million in the second quarter of 2020.
Operating expenses for the six months ended June 30, 2021, were $995,798, compared to $849,476 for the six months ended June 30, 2020. The increase in expenses is primarily due to increased sales activity in 2021.
Net income for the six months ended June 30, 2021, was $163,135 compared to a net loss of $471,944 for the six months ended June 30, 2020.
Net income for the three months ended June 30, 2021, was $264,786 compared to a net loss of $50,354 for the three months ended June 30, 2020.
“The company has finally put the pandemic and other extenuating circumstances behind us and is back on track,” said Kevin Frija, CEO of VPR Brands, in a statement. “The numbers, which show a tremendous turnaround from last year, speak for themselves as our team is focused on maintaining not only steady growth but most importantly profitability.”
August 23, 2021