Category: Financial

Vapor Stocks Plunge on China Health Warning

Photo: Kenishirotie
Vapor company stocks listed on the Hong Kong Stock Exchange plunged following an official warning that e-cigarettes can damage health, reports the Global Times. Smoore International saw its shares slump nearly 20 percent near the end of the May 26 trading session before finishing the day down 17.1 percent. China Boton Group lost 17.94 percent while Huabao International Holdings shed 7.69 percent. By comparison, the benchmark Hang Seng Index gained 0.88 percent.
The rout was triggered after the National Health Commission and the World Health Organization’s China office unveiled a joint report stating that there’s sufficient proof that e-cigarettes are unsafe and harmful to health.
According to the report, China’s smoking population tops 300 million, with the smoking rate for those aged 15 and above standing at 26.6 percent and the percentage of male smokers hitting 50.5 percent. Cigarettes claim the lives of more than 1 million people in the country per year, the authors wrote. The annual number is estimated to rise to 2 million by 2030 and then to 3 million by 2050, assuming the absence of effective actions.
The recent report contradicts a report by the U.K. Royal College of Physicians, which in 2016 concluded e-cigarettes are 95 percent safer than regular cigarettes and are likely to be hugely beneficial to public health.
One vapor company defied the panic selling on May 26: In the final hour of Hong Kong trading, BYD Electronic soared 22.91 percent on reports that the company has finalized patenting its e-cigarette business, which is expected to begin mass production in June.
May 26, 2021
Charlie’s Holdings ‘Turns the Corner’ in 2021

Photo: Charlie’s Holdings
Charlie’s Holdings reported increased revenue, gross profit, gross margin and cash balance in the first quarter of 2021.
Revenue decreased 1 percent year-over-year to $4.36 million but increased 3 percent from the fourth quarter of 2020. Gross profit decreased 1 percent year-over-year to $2.42 million but increased by more than 14 percent from the 2020 fourth quarter. Gross margin remained at 55 percent year-over-year and expanded 5 percent from the fourth quarter of 2020.
“Though 2020 was a difficult year for our entire industry, Charlie’s financial performance turned the corner in the first quarter of 2021,” said Charlie’s CEO Brandon Stump in a statement. “Incorporating a right-sized cost structure, strengthened balance sheet and launch of Pachamama Disposables, the company achieved growth in both revenue and gross margin versus the last quarter of 2020. Most importantly, we feel confident that Charlie’s is now positioned for accelerated growth going forward.”
On April 1, 2021, Charlie’s hired Henry Sicignano III as president to spearhead business strategy and capital markets initiatives. Sicignano previously served as president and CEO of 22nd Century Group.
Sicignano will work closely with Charlie’s CEO Brandon Stump to develop and execute business strategy in the rapidly changing electronic nicotine-delivery system marketplace.
So confident are we in Charlie’s future, my brother Ryan and I invested $3 million in Charlie’s common stock last quarter.
Brandon Stump, CEO, Charlie’s Holdings
“We are very pleased about the recent addition of Henry Sicignano as our president,” said Stump. “His past successes—in both his initiatives to provide adult smokers with alternatives to traditional combustible cigarettes and his experience growing and uplisting a public company—will prove invaluable to Charlie’s.
“So confident are we in Charlie’s future, my brother Ryan and I invested $3 million in Charlie’s common stock last quarter. We believe that Charlie’s is well on its way to emerging as America’s No. 1 premium nicotine-based e-cigarette company.”
May 24, 2021
Altria Group Holds Annual Meeting

Photo: Casimiro
Altria Group held its 2021 annual meeting of shareholders on May 20. During the annual meeting, CEO Billy Gifford summarized Altria’s full-year 2020 and first-quarter 2021 financial results and discussed Altria’s progress toward its vision of responsibly transitioning adult smokers to a noncombustible future. Gifford also shared Altria’s corporate responsibility priorities and environmental, social and governance efforts, reaffirmed Altria’s guidance for adjusted diluted earnings per share (EPS) and addressed shareholder questions.
Altria’s shareholders elected to a one-year term each of the 11 nominees for director named in Altria’s proxy statement, ratified the selection of PricewaterhouseCoopers as Altria’s independent registered public accounting firm for 2021, approved, on an advisory basis, the compensation of Altria’s named executive officers and rejected two shareholder proposals.
On May 10, 2021, Altria’s board of directors elected Kathryn McQuade to serve as Altria’s independent chair of the board. The appointment became effective following the conclusion of the annual meeting.
In his remarks, Gifford reaffirmed Altria’s guidance for 2021 full-year adjusted diluted EPS to be in a range of $4.49 to $4.62, representing a growth rate of 3 percent to 6 percent from an adjusted diluted EPS base of $4.36 in 2020.

May 21, 2021
PMI Highlights IQOS Momentum at Forum

Jacek Olczak
Presenting at the Goldman Sachs Global Staples Forum on May 18, Philip Morris International CEO Jacek Olczak highlighted the next steps in the company’s strategy to becoming a majority smoke-free company in terms of net revenue by 2025.
Olczak highlighted IQOS’ strong and accelerating topline momentum and potentially lucrative opportunities to expand beyond nicotine into broader lifestyle/wellness markets, such as high-margin botanicals and respiratory drug delivery.
IQOS added more than 1.5 million users in the first quarter of 2021, according to Olczak—well above its historical average of 1 million new users per quarter. Robust conversions at 70 percent to 80 percent continue to dwarf the average conversion rates of many vapor products, which are in the mid-teens.
The heat-not-burn device is now available in 66 markets, with a user base of 19.1 million, of which 14 million have stopped smoking and fully converted to IQOS.
Olczak was particularly excited about the launch, scheduled for the second half of 2021, of PMI’s ILUMA IQOS product, which he believes could drive even higher conversion rates and margins as PMI continues to leverage its fixed cost base on IQOS while streamlining its customer acquisition and retention.
Olczak also reviewed management’s ongoing efforts to digitalize and simplify business processes, including PMI’s commercialization strategies around IQOS. According to him, these efforts have already yielded $60 million of gross savings in selling, general and administrative expenses toward management’s target of $1 billion in 2021–2023.
Olczak believes that PMI’s digitalization efforts will not only further reduce the cost of acquiring and retaining new users and ultimately drive more profitable growth but also accelerate conversion and customer acquisition, especially with the eventual global rollout of PMI’s digital customer experience.
Olczak also touched on PMI’s longer term opportunities beyond heat-not-burn and vaping, including nicotine pouches and next-generation devices.
Management is also looking into adjacencies, such as broader lifestyle/wellness markets, such as high-margin botanicals (including pure CBD) and respiratory drug delivery. The company aspires to achieve at least $1 billion in incremental net revenue from its beyond nicotine efforts by 2025.
Olczak expressed optimism about PMI’s competitive advantages in terms of its capabilities around product safety and efficacy and validating/substantiating scientific claims.
May 19, 2021
Imperial Brands Delivers ‘Solid’ First-Half Results

Photo: Imperial Brands
Imperial Brands reported net revenue of £15.57 billion ($22.1 billion) in the six months ended March 31, 2021, up 6.1 percent over the net revenue it reported in the first half of 2020. Operating profit increased 77 percent to £1.64 billion. On an organic adjusted basis, Imperial Brands reported net revenue of £3.57 billion, up 2.4 percent from 2020. Adjusted operating profit was £1.59 billion compared with £1.46 billion in the first six months of 2020.
“We have made a good start in implementing our new strategy to transform Imperial and remain on track to meet full-year expectations,” said Imperial Brands CEO Stefan Bomhard in a statement.
“In tobacco, we have put in place a clear market prioritization to increase focus on our best opportunities for sustainable profit delivery. We have begun to stabilize the aggregate market share performance across our top five priority markets, reflecting the changes we have made to tighten performance management and the good underlying momentum established over the past year. This is an encouraging start and one that I look forward to building on over time as we begin to step up investment in new strategic initiatives.

We have made a good start in implementing our new strategy to transform Imperial and remain on track to meet full year expectations.
Stefan Bombard, CEO, Imperial Brands
“Our NGP [next-generation products] performance has improved, albeit against a weak comparator period. We have focused investment more tightly behind our NGP market strongholds and are on track to activate market trials in vapor and heated-tobacco later this year. Our aim is to create a successful NGP business that meets consumer needs and, over time, can make a meaningful contribution to harm reduction.
“We have started to change our culture and ways of working, including developing a new market cluster structure to simplify the organization and allocating resources more effectively. I have now assembled my new Executive Team with key external hires who have the necessary skills and expertise to complement Imperial’s existing tobacco experience. This has significantly strengthened the capabilities we need to support the successful delivery of the new strategy.
“All of this has been achieved against the background of the ongoing global pandemic, and I would like to thank employees throughout the business for their hard work and willingness to embrace change.”
May 18, 2021
Myst Labs Raises New Capital

Chenyue Xing (Photo: Myst Labs)
Myst Labs, a Chinese e-cigarette maker co-founded in 2019 by Chenyue Xing, a chemist who was part of the Juul Labs team that invented nicotine salts, recently raised “tens of thousands of dollars” in funding, reports TechCruch.
The news comes after Chinese policymakers published draft rules that would bring e-cigarettes under the same regulatory scope as traditional tobacco.
Such rules are likely to lead to a shakeout in China’s vapor business, leaving the industry in the hands of a few players with the resources to comply.
According to Myst Head of Marketing Fang Wang, the prospect of regulations has sparked interest among institutional investors who previously avoided the vapor sector.
The company’s recent funding round was led by Myst Labs’ existing investor, IMO Ventures. Myst declined to list its other investors but said they include high-profile individuals involved in the e-bike sharing company Lime, Facebook and the bitcoin industry.
Most of Myst’s current sales are in China, where it has opened 600 stores and plans to reach a footprint of 1,000 stores in the next quarters. Overseas, the startup has a retail footprint in Malaysia, Russia, Canada and the United Kingdom.
The new funding will allow Myst to further expand its sales network and strengthen its research and development. The company prides itself on its product containing 1.7 percent nicotine, which it claims can deliver the effect of a 3 percent counterpart. Xing is currently working on e-liquids with “natural tobacco contents” and without organic acids, additives that allow nicotine salts to vaporize and be absorbed.
While a small player compared to market leader RLX Technology, which went public in New York earlier this year and has submitted a premarket tobacco product application to the U.S. Food and Drug Administration to sell in the U.S., Myst is growing quickly.
Co-founder Thomas Yao says the company’s recent sales have been tripling every three months.
According to a 2019 article by Bloomberg, Xing grew up in Shanghai and moved to the U.S. to study. She got a Ph.D. in chemical engineering at the University of California, Davis, and worked at U.S. biotech and pharmaceutical companies, specializing in orally inhaled drugs for diseases like asthma. She joined Juul to help people stop smoking but left when the parent company expanded its focus to offer marijuana vaporizers.
Xing started Myst this year with Yao, who is also a founding partner at IMO Ventures. The firm was an early investor Lime scooters and Paytm digital wallets, among other ventures.
Myst’s employees are split between Silicon Valley, where scientists work on research, and Shenzhen, China, where the manufacturing and marketing staffs make and sell the devices.
May 9, 2021
Vector Group Reports Strong Earnings

Photo: MIND AND I
Vector Group announced financial results for the three months ended March 31, 2021.
“Vector achieved strong earnings performance in the first quarter in our tobacco and real estate businesses, a testament to our team’s hard work and our commitment to creating long-term stockholder value,” said Howard M. Lorber, president and CEO of Vector Group, in a statement.
“Our Liggett subsidiary continues to successfully execute its market strategy, and our Douglas Elliman real estate business saw continued and robust closed sales activity.”
The company reported consolidated revenues of $543.8 million, up 19.6 percent compared to the prior year period. Reported net income was $32 million. Adjusted net income was $45.3 million. Reported operating income was $90.2 million, up $95.1 million over the prior year period.
Tobacco segment operating income was $81.6 million, up 18 percent over the prior year period.
Adjusted EBITDA was $94.3 million, up 57 percent. Tobacco segment adjusted EBITDA was $80.6 million, up 13 percent.
May 7, 2021
Indonesia: Profits Plunge After Tax Hike

Photo: Taco Tuinstra
The profits of Indonesia’s two biggest cigarette manufacturers dropped significantly following a cigarette excise tax hike, reports The Jakarta Post.
Gudang Garam and Sampoerna saw their net profits decline 28.62 percent year-on-year to IDR1.74 trillion ($120.6 million) and 22.13 percent to IDR2.58 trillion, respectively, in the first quarter of the year.
The two companies’ net profits were hit by rising excise costs on top of weak cigarette demand. The finance ministry raised cigarette excises by around 12.5 percent starting in February after raising them 23 percent last year to deter smoking and raise state revenue.
However, the hike applied to only machine-made cigarettes and not to hand-rolled cigarettes.
Most of tobacco companies’ sales volume in Indonesia comes from machine-made clove cigarettes.
May 7, 2021
22nd Century Reports ‘Exciting’ First Quarter

Photo: snowing12
22nd Century Group reported net sales revenue of $6.8 million for the first quarter of 2021 compared to $7.1 million in the 2020 first quarter.
Gross profit improved by $360,000 to $647 thousand; gross profit margin improved by 540 basis points. Gross profit margin improved year-over-year for the fifth consecutive quarter.
Net loss for the first quarter of 2021 was $5 million compared to $4 million in the same quarter last year. The change in net loss was driven by investment in anticipation of a modified-risk tobacco product (MRTP) designation of 22nd Century’s VLN cigarettes.
Adjusted earnings before interest, taxes, depreciation and amortization for the first quarter of 2021 was a $4.4 million loss compared to a $3.2 million loss for the first quarter of 2020.
In a press release, the company said its financial position is strong, with cash, cash equivalents and short-term investment securities totaling $30.9 million at the end of the first quarter of 2021.
“Our 2021 is off to an exciting start as we anticipate achieving multiple key milestones that will dramatically expand our commercial opportunities in both our tobacco and hemp/cannabis franchises,” said James A. Mish, CEO of 22nd Century Group.
“I remain highly confident in our MRTP authorization. We continue to steadily increase our advocacy activities at both the federal and state levels to achieve MRTP authorization in support of this critical public health issue. In addition to our primary VLN launch strategy to go to market within 90 days of authorization, we remain willing to license our technology to every cigarette manufacturer to help them join us in our efforts to reduce the harm caused by smoking and to protect future generations from ever becoming addicted to cigarettes.”
May 6, 2021
STG Raises Guidance After Strong Quarter

Photo: STG
For the first quarter of 2021, Scandinavian Tobacco Group (STG) delivered a stronger than expected organic growth in net sales and earnings before interest, taxes, depreciation and amortization (EBITDA). The results were driven by a continued high demand in handmade cigars in the U.S., synergies from the integration of Agio Cigars and the transformational program Fueling the Growth, according to STG. Additionally, the results were positively impacted by timing of orders between quarters.
Net sales were DKK1.88 billion ($304.53 million), reflecting with 12.5 percent organic growth. EBITDA before special items was DKK527 million, with 49.1 percent organic growth. The EBITDA margin was 28 percent compared with 18.5 percent in the comparable 2020 quarter.
The integration of Agio Cigars is ahead of plan, according to STG, which has revised expected cost savings upward.
“Demand and consumer behavior remain positively impacted by the Covid-19 pandemic with high consumption of handmade cigars and smoking tobacco products in the U.S.,” the company wrote in a press release. “The integration of Agio Cigars is running ahead of schedule and is now expected to deliver about DKK100 million in synergies for the year and about DKK250 million run-rate by the end of 2022. The combined market shares for machine-rolled cigars in key European markets continue to develop satisfactorily.”

Despite the continued challenges and uncertainty created by the Covid-19 pandemic, our business continues to do well.
Niels Frederiksen, CEO, STG
At the same time, STG noted that Covid-19 is creating significant uncertainty in the second half of the year. “Consumption of handmade cigars and purchasing patterns between online and brick-and-mortar retail stores in the U.S. cannot be forecasted with the normal level of accuracy,” the company stated. “Both are factors with significant impact on the group’s performance. Consequently, a range is introduced for the expected organic EBITDA performance as well as the cash flow before acquisitions.
For 2021, the company now expects organic EBITDA growth in the range of 12 percent to 18 percent, up 7 percent over the earlier forecast.
“Despite the continued challenges and uncertainty created by the Covid-19 pandemic, our business continues to do well,” said STG CEO Niels Frederiksen. “For the first quarter of the year, we can present strong growth in both net sales and EBITDA. I am particularly pleased to see that numerous initiatives across the organization are resulting in strong net sales, growing market shares as well as increased operational performance and efficiency.”
May 6, 2021