Category: Financial

  • Pyxus Releases Improved Results

    Pyxus Releases Improved Results

    Pieter Sikkel (Photo: Pyxus International)

    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.”

  • Universal Reports Results

    Universal Reports Results

    Photo: Taco Tuinstra

    Universal Corp. reported net income for the quarter ended Dec. 31, 2020, of $33.3 million, compared with net income of $26 million, for the prior year’s third fiscal quarter. Excluding restructuring and impairment costs and certain other non-recurring items net income increased by $27.5 million from the comparable 2019 quarter. Operating income for the third quarter of fiscal year 2021 increased to $60.2 million compared to $44.1 million for the three months ended Dec. 31, 2019.

    Net income for the nine months ended on Dec. 31, 2020, was $48 million, compared with $56.1 million for the same period of the prior fiscal year. Excluding restructuring and impairment costs and certain other non-recurring items, net income increased by $3.4 million for the nine months ended Dec. 31, 2020, compared to the nine months ended December 31, 2019. Operating income of $85.1 million for the nine months ended Dec. 31, 2020, was down from operating income of $94.8 million for the nine months ended Dec. 31, 2019.

    George Freeman

    “Tobacco shipments in the third quarter of fiscal year 2021 exceeded our previous expectations as customer mandated timing for some shipments forecast for the fourth fiscal quarter were accelerated into the third fiscal quarter,” said George C. Freeman, III, chairman, president and CEO of Universal Corp. in a statement. “As a result, total tobacco shipment volumes for the nine months ended Dec. 31, 2020, are similar to those of the prior year’s comparable fiscal period.

    “The majority of our remaining committed tobacco orders for the 2020 crop are packed and ready to ship, and we expect sustained strong tobacco shipment volumes in our fourth fiscal quarter of 2021 barring any unforeseen events including changes in shipment timing. In addition, our uncommitted tobacco inventory levels remain within our target range. We continue to believe our adjusted operating income for fiscal year 2021, which excludes restructurings and certain costs for acquisitions, will materially exceed that for fiscal year 2020, barring any unforeseen events including shipment delays due to lack of vessel or container availability, port congestion, or Covid-19 related uncertainties.”

    Universal Corp.’s board of directors declared a quarterly dividend of $0.77 per share on the common shares of the company, payable May 3, 2021, to common shareholders of record at the close of business on April 12, 2021. 

  • KT&G Posts Record Results

    KT&G Posts Record Results

    Photo: KT&G

    KT&G posted record results in 2020 due to remarkable growth in its global markets. On Feb. 4, the South Korean company announced an operating profit of KRW1.17 trillion ($1.05 billion) on sales of KRW5.3 trillion, up 7.5 percent and 6.8 percent, respectively over the previous year.

    KT&G attributes its performance to a rise in sales in overseas markets. In early 2020, KT&G the company entered the Middle East by signing a contract worth KRW2.2 trillion for seven years with a local tobacco importer. The expansion of its distribution network pushed up sales in the United States.

    KT&G made inroads into 23 countries last year, increasing the number of its export markets to 103 countries. It also started exporting e-cigarettes to Russia and Japan by forging a partnership with Philip Morris International.

    As a result of brisk overseas market development, the company sold more than 100 million units in annual sales in five countries including Cameroon, Israel, and Guatemala. It sold 48 billion cigarettes worth krw986.2 billion in the global market alone last year.

    Domestic cigarette sales increased by 2.5 percent to 41.6 billion sticks in 2020, a development that KT&G attributes to Covid-19 related overseas travel restrictions, among other factors. South Korea’s market for heat-not-burn remained stable during 2020.

    KT&G’s 2020 fourth quarter and annual earnings release is available for download here.

  • ‘JT’s Strategy Not Paying Off’

    ‘JT’s Strategy Not Paying Off’

    Photo: Taco Tuinstra

    Diversifications and acquisitions have not paid off for Japan Tobacco (JT), according to Seeking Alpha, a crowd-sourced contents service for financial markets. Despite relatively stable sales trends and operating margins, JT shareholder value has declined in recent years.

    Confronted by sales declines in its domestic market, JT in recent years shifted its focus to nontobacco markets, investing in pharmaceuticals, bakeries and processed foods, among other sectors. JT also acquired other tobacco brands and businesses, including Natural American Spirit; PT Karyadibya Mahardhika; United Dhaka and Donskoy Tabak, for large sums.

    According to Seeking Alpha, these acquisitions have not yielded the desired results.

    “Since 2017 when ESG [environmental, social and corporate governance] started to gain momentum, JT’s performance has not been good enough to support the share price despite relatively stable free cash flow generation,” Seeking Alpha wrote. “We conclude that the risk profile of the business continues to rise, and the company has not allocated its capital successfully in order to mitigate these risks. With a lack of progress and no easy answers, we rate these shares a sell.”

  • TPB Announces Private Offering

    TPB Announces Private Offering

    Photo: Tobacco Reporter achive

    Turning Point Brands (TPB) announced the proposed private offering of $250 million aggregate principal amount of its senior secured notes due 2026. The notes will bear cash interest semi-annually beginning in 2021. The notes will be TPB’s senior secured obligations and will be guaranteed on a senior secured basis by each of TPB’s wholly owned domestic subsidiaries (except for certain specified subsidiaries).

    TPB intends to use the proceeds from the offering to repay all obligations under and terminate its existing term loan and revolving credit facility; to pay related fees, costs and expenses; and for general corporate purposes. The offering is subject to market conditions.

    TPB also announced that in connection with the offering, it intends to enter into a new $25 million senior secured revolving credit facility. The offering is not conditioned on the entry into the revolving credit facility.

    In connection with its proposed offering, TPB announced certain preliminary operating results for the fourth quarter and full year ended Dec. 31, 2020.

    TPB estimates that for the fourth quarter of 2020 net sales will be between $103.5 million and $105.5 million, income before taxes will be between $16 million and $17 million and adjusted EBITDA will be between $25 million and $26 million. Each of net sales and adjusted EBITDA will be near or above the high end of TPB’s previously disclosed guidance for the fourth quarter of 2020. TPB plans to release its full year end 2020 financial results on Feb. 10, 2021.

    The company will hold a conference call to review fourth quarter and fiscal year 2020 results on Feb. 10.

  • Imperial Brands Announces New Strategy

    Imperial Brands Announces New Strategy

    Photo: Casimirokt – Dreamstime.com

    Imperial Brands has announced a new strategy to create long-term value. The company says it will focus on priority combustible markets, drive value from its broader market portfolio and build a targeted next-generation products (NGP) business.

    Imperial Brands will focus its investment and resources around the U.S., Germany, the U.K., Australia and Spain, which represent 72 percent of its combustible operating profit.

    At the same time, the company will selectively build markets where it has attractive leadership positions, such as Africa and other European markets, while selectively exiting a small number of markets where it has a relatively weaker presence.

    Furthermore, Imperial Brands will focus its investment behind heated tobacco opportunities in Europe and in selective market opportunities in vapor, particularly in the U.S. Imperial’s oral nicotine business will remain focused on its existing markets within Europe. The aim is to develop a sustainable NGP business that supports Imperial’s ESG agenda by making a meaningful contribution to harm reduction.

    Stefan Bomhard

    “We have undertaken a comprehensive strategic review, examining all opportunities for unlocking value,” said Stefan Bomhard, CEO of Imperial Brands, in a statement. “This process has reinforced my view that the group has solid foundations on which we can build a better and stronger business. Our new detailed five-year plan sets out clear strategic priorities, which will drive targeted investment behind those markets and brands with the greatest opportunities for value creation. We have put the consumer at the center of everything we do and are beginning to reshape our culture to support the new strategy. This will improve our ways of working and create an agile, collaborative and performance-based business that will deliver a stronger, more consistent performance.”

    To support the delivery of its strategic priorities, Imperial is changing how it operates to embrace new ways of working and to enhance its culture. Three critical enablers to drive these changes have been identified: consumer at the center of the business; performance-based culture and capabilities; and simplified and efficient operations.

    As a result of these changes, Imperial will increase its investment in core capabilities, such as sales and marketing, by £50 million ($68,28 million) to £60 million per year. This additional investment will be funded by efficiency savings as the company reorganizes and simplifies the business, generating annualized savings of £100 million to £150 million by the end of fiscal year 2023. The anticipated cash costs of the initiatives are £245 million to £275 million, with the majority of the spend occurring in fiscal year 2022. In addition, the company expects to incur associated non-cash restructuring charges, currently expected to be around £150 million. Any additional restructuring charges beyond fiscal year 22 will not be treated as an adjusting item.

    Imperial’s outlook for fiscal year 21 remains in line with the statement provided at the preliminary results on Nov. 17, 2020.

    The new plan is expected to deliver a gradually improving trajectory in net revenue over the five years with a compound annual growth rate of 1 percent to 2 percent for fiscal year 2020 to fiscal year 2025.

  • Altria Full-Year Revenues up

    Altria Full-Year Revenues up

    Photo: Altria Group

    Altria Group reported net revenues of $26.15 billion in fiscal 2020, up 4.2 percent from 2019. The company attributes the increase to higher net revenues in the smokable products and oral tobacco products segments, partially offset by lower net revenues in the “all-other” category and the wine segment. Revenues net of excise taxes increased 5.3 percent to $20.84 billion.

    “Altria delivered outstanding results in 2020 and managed through the challenges presented by the Covid-19 pandemic,” said Altria CEO Billy Gifford. “Our tobacco businesses were resilient, and we made steady progress toward our 10-year vision to responsibly transition adult smokers to a noncombustible future.”

    “Our plans for the year ahead include accelerating investments in support of our 10-year vision, which we expect to fund through the continued financial strength of our tobacco businesses. We expect to deliver 2021 full-year adjusted diluted EPS [earnings per share] 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.”

    In a press note, Altria Group highlighted notable developments in key business segments over the past fiscal year.

    In December, the U.S. Food and Drug Administration authorized the IQOS 3 device for sale in the U.S. The new device has a longer battery life and a faster re-charging time compared to the currently authorized 2.4 version. Altria subsidiary Philip Morris USA expects to begin selling the new device shortly and that it will be made available across all existing retail channels in Atlanta, Charlotte and Richmond.

    In the fourth quarter, Altria’s Helix subsidiary expanded the distribution of On! Nicotine pouches by an additional 22,000 stores. On! is now available in approximately 78,000 stores as of the end of the fourth quarter, an increase of nearly 40 percent from the end of the third quarter and more than five times the store count from the end of 2019.

    Helix reached annualized manufacturing capacity for On! of 50 million cans in the fourth quarter. Helix expects unconstrained On! manufacturing capacity for the U.S. market by mid-year 2021.

    In November, Altria exercised its right to convert its nonvoting shares in Juul to voting shares. The company said it does not currently intend to exercise its additional governance rights obtained upon share conversion, including the right to elect directors to Juul’s board, or to vote its Juul shares other than as a passive investor, pending the outcome of the U.S. Federal Trade Commission litigation.

    Altria said its tobacco businesses have not experienced any material adverse effects associated with governmental actions to restrict consumer movement or business operations amid the Covid-19 pandemic. Most retail stores in which their products are sold have been deemed to be essential businesses by authorities and remain open.

  • Egypt Raises Cigarette Prices

    Egypt Raises Cigarette Prices

    Photo: Taco Tuinstra

    Egypt plans to increase cigarettes prices by EGP0.25 per pack in July 2021, reports The Daily News.

    The proceeds of the increase will contribute to funding for the Universal Healthcare Insurance program. When the program was launched in July 2018, the government increased cigarette prices by EGP0.75 per pack to raise funding.

    Under the program’s regulations, an additional EGP0.25 per pack will be added every three years until the total tax reaches EGP1.50/ per pack.

    Domestic market leader Eastern Co. said it expects the rises to be enforced as per schedule.

    The company is expected deliver a strong performance in fiscal year 2020-2021, on the back of higher production capacity and utilization rates. The company recently upgraded its production facilities, increasing the production capacity from 200 million cigarettes per day to 250 million cigarettes per day.

    Eastern’s performance is further boosted by the reduction in the retailer’s margin on cigarettes through indirect price increases, from EGP0.10 per pack to EGP 0.025 per pack in December 2020.

    The appreciation of the Egyptian pound will likely also enhance Eastern’s performance as it relies entirely on imports for raw tobacco, which make up more than 80 percent of raw materials.

  • RLX Seeks up to $1.17 Billion From Offering

    RLX Seeks up to $1.17 Billion From Offering

    Photo: Tobacco Reporter archive

    RLX Technology is looking to raise as much as $1.17 billion from a U.S. initial public offering, reports Bloomberg.

    The Chinese vapor company, known for its RELX-branded devices in China, had earlier considered Hong Kong as a listing venue, but it ultimately opted for the U.S.

    Founded in 2018, RLX is China’s largest e-cigarette maker. The vaping industry has boomed in China even as the country banned online sales of e-cigarettes just over a year ago.

    China is the world’s largest potential vaping market, with an estimated 286.7 million adult smokers in 2019, RLX said in its prospectus. But vaping products only have a 1.2 percent penetration rate, compared with 32.4 percent in the U.S.

    RLX’s revenues increased to CNY2.2 billion ($340 million) in the first nine months of 2020 from CNY1.14 billion a year earlier. It started turning a profit in 2019 and recorded net income of CNY109 million in the nine months to Sept. 2020.

    The company plans to price the IPO on Jan. 20 after the U.S. market closes, according to a term sheet. Citigroup and China Renaissance are joint bookrunners for the offering.

    Earlier reports suggested the company planned to raise up to $100 million in its IPO. 

  • The Blinc Group Raises $1.5 million

    The Blinc Group Raises $1.5 million

    Photo: Tobacco Reporter archive

    The Blinc Group has raised $1.5 million in bridge financing. The company will use the proceeds to expand its team, develop new materials and vape technologies, and open an office in Toronto.

    Arnaud Dumas de Rauly

    “The Blinc Group puts quality and safety at the forefront of its vape technology and since day one, that dedication to the highest standards has brought us the endorsement of institutional investors focused on the cannabis industry,” said Arnaud Dumas de Rauly, CEO and co-founder of the Blinc Group, in a statement.

    “Our team navigated 2019’s vape crisis helping set standards and advise regulators on testing and compliance, and last year the company saw our best quarter yet amid the Covid-19 pandemic as the industry learned the benefits of safety and traceability.”

    In 2020, Blinc Group more than tripled its orders with more than 330 percent year-on-year growth, showcasing the technology company’s ability to scale and flourish in a difficult regulatory landscape. The group attributes much of its success to the emphasis it places on safety and compliance.

    “We began underwriting our initial investment in Blinc near the onset of the so-called vape crisis in 2019 and it became quickly apparent that the team’s experience within the vape technology space and its focus on quality, traceability and customer service would see them through and enable them to emerge as a market leader,” said Andi Goldman, managing member and co-founder of the Equitas Partners Fund.

    “We have watched the Blinc team over the past few years as they have grown their business and dedicated their focus to safety and traceablity within the vape hardware sector,” said Michael Mitgang, managing director and co- founder of the WGD Opportunity Fund. “Blinc’s reputation for putting these important factors first has secured customer wins with some of the leading cannabis operators in North America.”

    “The vape category is one of the primary revenue drivers in every market and satisfies the demands of some of the most committed cannabis consumers. Providing high-quality products is a must for any brand looking to win and retain loyal shoppers,” said 7thirty’s Director of Research, Ben Richardson.