Four municipalities in the Ilocos region of the Philippines that, during the past two years, received the biggest shares from tobacco excise taxes have failed to publicly disclose how the funds are being spent, in violation of budget rules, according to a major Vera Files story by Maria Feona Imperial, Lucille Sodipe and Jake Soriano, published in the Philippine Star.
Candon City, the municipalities of Cabugao and Santa Cruz in Ilocos Sur, and Balaoan in La Union reportedly each received more than a billion pesos in tobacco excise taxes since 2016 but failed to comply with Department of Budget and Management (DBM) memoranda reporting requirements.
LGUs [Local Government Units] that benefit from excise taxes are required to prepare quarterly reports on fund utilization and the status of projects, following a prescribed format. These reports are to be posted within 20 days after every quarter on the LGUs’ websites, and in at least three conspicuous public places.
Two laws, Republic Act 7171 and RA 8240, later amended by RA 10351, provide tobacco-producing local governments 15 percent of total excise taxes collected annually on the sale of tobacco products.
Local governments’ shares in these taxes, which are earmarked to ‘advance the self-reliance of tobacco farmers’, have risen to more than P41 billion since 2016, an election year, when the national government started releasing a windfall of excise tax shares after the sin tax reform law, which imposed higher taxes on cigarettes.
Prior to 2016, the funds were channeled through lawmakers, a scheme that the Supreme Court declared unconstitutional due to post-enactment intervention in the implementation of the national budget.
The budget releases were since accompanied with guidelines on the use of funds and ’emphasized the concomitant posting and reporting (of) requirements to enhance transparency and accountability’.
Yet VERA Files said that it had found that the top recipients of tobacco excise tax shares since 2016 had failed to comply with the DBM’s reporting requirements.
Reports showed also that proceeds from the taxes were being used to fund projects that did not directly benefit tobacco farmers.
Budget Secretary Benjamin Diokno, in an interview with VERA Files, said noncompliance could be grounds for administrative action, including suspension from office.
Category: Financial
Following the money
Modest price increase
The prices paid so far this season to Zimbabwe growers for flue-cured tobacco is up by 3.3 percent on that of the previous season, according to a story in The NewsDay.
The newspaper reported that Tobacco Industry and Marketing Board (TIMB) figures indicated that the average price of US$2.81 per kg as of last week was up by US$0.09 per kg on that of the same period of the 2017 selling season, US$2.72 per kg.
The president of the Federation of Farmers Union, Wonder Chabikwa, said the price increase was due to buyers fearing that production was down this season.
Meanwhile, the chief executive of the Zimbabwe Tobacco Association, Rodney Ambrose, said the rate at which the seasonal average was improving had slowed down due to daily prices being slightly below those of 2017.
“As volumes increase and better quality of tobacco comes onto the market, we hope the seasonal average will remain above 2017, whereas in previous seasons the average prices paid to farmers have been on a downward trend against increased costs,” Ambrose was quoted as saying.
He said the worldwide supply of tobacco remained relatively static, while demand continued to decline. But the quality of tobacco on offer in Zimbabwe was better than that of last season, and this should drive the market to pay more.
“Consideration should also be made in the case of Zimbabwe [of] the difference between the international US$ price paid for tobacco and the high local dollar costs,” Ambrose said, before adding that the industry appreciated the 12.5 percent Reserve Bank of Zimbabwe (RBZ) export incentive that would partially assist with the absorption of increased local costs.
“Our appeal to the RBZ remains – allow tobacco farmers direct access to US$ facilities,” Ambrose said. “Any form of additional funding made to support tobacco farming should be channeled towards improving the viability of farmers rather than targeting increased growers, hectares and volumes.”New product promised
Japan Tobacco Inc’s domestic cigarette volume sales during the three months to the end of March, at 19.5 billion, were 15.0 percent down on those of the three months to the end of March 2017, 23.0 billion.
JT reported today that, at the same time, the industry’s cigarette volume, which was impacted by sales of reduced-risk products (RRP), was down by 15.6 percent from 37.7 billion to 31.8 billion.
The company’s market share rose by 0.5 of a percentage point to 61.4 percent.
JT estimated the overall RRP market in Japan during the first quarter at about 20 percent of the total tobacco industry volume. JT’s RRP sales volume was said to be 0.3 billion cigarette equivalent units with Ploom TECH’s market share estimated at between three and four percent where it was available.
JT’s domestic tobacco business core revenue declined by 10.1 percent, from ¥143.9 billion to ¥129.3 billion, while adjusted operating profit declined by 14.4 percent from ¥57.2 billion to ¥48.9 billion.
Meanwhile, Japan Tobacco International’s shipment volume during the three months to the end of March, at 98.4 billion, was increased by 7.3 percent on that of the three months to the end of March 2017, 91.7 billion. At the same time GFB (global focus brands) volume increased by 3.1 percent from 60.2 billion to 62.0 billion.
JT said that JTI’s increase in volumes had been driven by acquisitions in Ethiopia, Indonesia and the Philippines, and favorable inventory movements. Excluding these, total shipment volume declined by 2.2 percent.
‘Volume increases across Iran, Romania, Spain, Turkey and emerging markets were unable to offset the impact of the industry volume contraction, notably in France, Russia and Taiwan,’ JT reported.
‘GFB shipment volume increased 3.1 percent growing across all clusters, mainly driven by the growth of Winston, Camel and LD.
‘Total and GFB market share grew in the key markets of France, Russia, Spain and Taiwan.’
JTI’s core revenue during the first quarter, at ¥294.8 billion, was increased by 6.8 percent on that of the first quarter of 2017, ¥276.0 billion, while adjusted operating profit increased by 4.7 percent from ¥92.0 billion to ¥96.3 billion.
“Our first quarter results illustrate a solid start for achieving our full year profit target in a business environment which remains challenging,” said Masamichi Terabatake, president and CEO of the JT Group.
“Our traditional tobacco products, the platform of the Group’s profitability, delivered robust top-line growth led by pricing in the international tobacco business. We also increased our market share in the Japanese domestic tobacco business driven by MEVIUS.
“M&A activities last year contributed to our top-line growth following our strategic geographical expansion. Our recent decision to acquire Donskoy Tabak companies will reinforce our No.1 position in Russia after the closing.
“We continue to invest in Reduced-Risk Products on a global basis, as these will contribute to our future growth and ensure a wide choice of products for consumers. In Japan, we will increase our presence both geographically and through product diversification.
“Since our operation of production equipment for the tobacco capsules is being stabilized with our effort to increase its output, we will start a nationwide roll-out of Ploom TECH in June and expand to convenience stores as of July. We also are aiming to launch a new heated tobacco product as early as the year-end or early 2019.”Marlboro US share down
PM USA’s domestic cigarette shipment volume during the three months to the end of March, at 27,552 million, was down by 4.2 percent on that of the first quarter of 2017, 28,727 million.
In reporting its first-quarter results, Altria – of which PM USA is its cigarette division – said that the fall in cigarette shipments was driven primarily by the industry’s rate of decline and retail share declines, partially offset by trade inventory movements.
Within PM USA’s total shipments, Marlboro volume was down by 4.2 percent to 23,653 million, while the volume of the company’s other premium brands fell by 2.8 percent to 1,409 million. Sales of discount brands fell by 4.7 percent to 2,460 million.
PM USA’s cigarette market share during the three months to the end of March, at 50.3 percent, was down by 0.7 of a percentage point on that of the first quarter of 2017.
Marlboro’s share fell by 0.5 of a percentage point to 43.2 percent, while the share of the company’s other premium brands fell by 0.1 of a percentage point to 2.6 percent. The share of PM USA’s discount brands fell by 0.1 of a percentage point to 4.5 per cent.
Altria’s first quarter results, reported yesterday, included also those of Middleton and USSTC.
Middleton’s domestic cigar shipment volume during the three months to the end of March, at 378 million, was up by 3.0 percent on that of the first quarter of 2017, 367 million. Shipment volume of the company’s Black & Mild brand was increased by 3.3 percent to 375 million, while that of its other brands fell by 25 percent from four million to three million.
USSTC’s domestic market shipment volume of smokeless products during the three months to the end of March, at 195.7 million cans and packs, was down by 0.1 percent on that of the first quarter of 2017, 198.5 million.
Copenhagen’s shipment volume fell by 0.1 percent to 124.4 million, and Skoal’s volume was down by 1.1 percent to 55.0 million. The shipment volume of other brands increased by 3.8 percent to 16.3 million.
USSTC did not provide adjusted shipment volume comparisons because of the unusual effects caused by a 2017 recall. But it said that the smokeless industry volume had declined by an estimated one percent during the past six months.
USSTC’s retail market share during the three months to the end of March, at 53.8 percent, was up by 0.1 of a percentage point from that of the first quarter of 2017.
Copenhagen’s market share increased by 1.1 percentage points to 34.3 percent, while Skoal’s share fell by 1.2 percentage points to 16.2 percent. Other brands’ market share increased by 0.2 of a percentage point to 3.3 percent.
“Altria is off to a fast start to the strong year of EPS growth to which we’ve guided, with adjusted diluted EPS growth of 30.1 percent in the first quarter of 2018,” said Marty Barrington, Altria’s chairman, CEO and president.
“In addition, Altria continued to reward shareholders by paying out nearly $1.3 billion in dividends, announcing an out-of-cycle dividend increase of 6.1 percent and repurchasing approximately $513 million in shares.
“Within the reporting segments, income performance reflects the timing of previously announced investments for the long-term strength of the business.
“We continue to expect full year adjusted diluted EPS growth of 15 percent to 19 percent.”
Meanwhile, Altria said that in pursuit of its ambition to be the US leader in ‘authorized, non-combustible, reduced-risk products’, USSTC had submitted a modified risk tobacco product application (MRTPA) to the US Food and Drug Administration for Copenhagen Snuff Fine Cut.
In addition, Altria had grown Nu Mark volume by about 30 percent and expanded the distribution of MarkTen Elite, a pod-based closed system product, to more than 6,000 retail stores.
And PM USA had participated in Philip Morris International’s presentation to the FDA’s Tobacco Products Scientific Advisory Committee about the IQOS MRTPA. PM USA’s initial lead market plans for IQOS were ready to deploy upon FDA authorization.Sales picking up
Flue-cured tobacco deliveries to Zimbabwe’s auction floors have increased, partly because growers need to raise money for their children’s school fees, according to a story by Elita Chikwati for the Herald.
Boka Tobacco Floors’ operations manager Moses Bias, who confirmed that deliveries to the auction floors had firmed, said that this was a normal trend as schools opened.
“We used to receive an average of 1,700 bales per day during the first days, but now we are getting an average of 6,000 bales per day,” he said.
Bias said the season was going well and that there had not been any challenges with prices.
The Herald story said that growers had sold about 45 million kg of flue cured tobacco for about $125 million, an average price of $2.79 per kg.
As has become normal practice, no indication was given of how this average compares with that of last season.
However, with 70 million kg sold during the 2017 season, the average price stood at 2.76 per kg; and with 60 million kg sold during the 2016 season, the average price stood at US$2.82 per kg.
The highest price paid so far this season at auction was said to have ‘remained’ on US$4.99 per kg, while contract prices had gone beyond US$5 per kg.
The highest contract price paid during the first 30 days of the 2016 selling season was US$6.25 per kg, whereas the highest auction price was US$4.99 per kg.PMI’s volumes falter
Philip Morris International’s cigarette shipment volume during the first quarter of 2018, at 164,280 million, was down by 5.3 percent on that of the first quarter of last year, 173,552 million. The first-quarter-2017 figure was down by 11.3 percent on that of the first quarter of 2016, 196,041 million.
Volume increased in PMI’s South and Southeast Asia region by 6.1 percent to 40,218 million. But it fell in each of its other five regions (PMI now divides its operations into six regions, rather than the four used previously): by 6.7 percent to 39,671 million in the EU; by 10.4 percent to 22,039 million in Eastern Europe; by 8.5 percent to 29,248 million in the Middle East and Africa; by 18.3 percent to 14,091 million in East Asia and Australia; and by 1.5 percent to 19,013 million in Latin America and Canada.
The company reported an increase in its shipment sales of heated-tobacco units from 4,435 million during the first quarter of 2017 to 9,566 million during the first quarter of 2018. Sales of these products have risen hugely since the first quarter of 2016, when they stood at 4,435 million.
Shipments of heated tobacco products were up from 184 million to 928 million in the EU; from 54 million to 564 million in Easter Europe; from 51 million to 709 million in the Middle East and Africa; from 4,145 million to 7,342 million in East Asia and Australia, and from one million to 23 million in Latin America and Canada.
Overall, shipment volumes of cigarettes and heated tobacco products taken together were down by 2.3 percent. They were down by 5.0 percent in the EU; down by 8.3 percent in Eastern Europe; down by 6.5 percent in the Middle East and Africa; up by 6.1 percent in South and Southeast Asia; up by 0.2 percent in East Asia and Australia; and down by 1.4 percent in Latin America and Canada.
PMI said that its total shipment volume had decreased by 2.3 percent principally due to its performance in the EU, which reflected lower cigarette shipment volume mainly in France, Germany and Poland; in Eastern Europe, which reflected lower cigarette shipment volume mainly in Russia and Ukraine; and in the Middle East and Africa, which reflected lower cigarette shipment volume mainly in the GCC, notably Saudi Arabia, and North Africa, notably Algeria, partly offset by higher cigarette shipment volume mainly in Turkey and PMI Duty Free.
These factors had been partly offset by its performance in South and Southeast Asia, which had reflected higher cigarette shipment volume, driven mainly by volumes in Pakistan and Thailand, partly offset by that in Indonesia; and in East Asia & Australia, which had reflected higher heated tobacco unit shipment volume, driven by volumes in Japan and Korea.
PMI added that, excluding the net unfavorable impact of total estimated distributor inventory movements of about 2.1 billion units, driven mainly by Japan and Saudi Arabia, its total shipment volume had decreased by 1.1 percent.
PMI said that its reported diluted earnings per share, at $1.00, were down by $0.02 or 2.0 percent on those of the first quarter of 2017.
Adjusted diluted earnings per share, at $1.00, were up by $0.02 or 2.0 percent.
Net revenues of $6.9 billion were up by 13.7.
Operating income of $2.4 billion was up by 0.4, while adjusted operating income of $2.4 billion was up by 0.4 percent.
“We began the year with strong, currency-neutral net revenue growth of more than eight percent in the quarter, driven by higher volume for heated tobacco units and IQOS devices coupled with higher pricing from our combustible product portfolio,” said CEO André Calantzopoulos (pictured).
“Our increased full-year EPS guidance reflects the benefit of a lower effective tax rate and incorporates, at this early stage in the year, some caution regarding: on-going volume challenges in the GCC; the pricing environment in Russia; and less-rapid-than-initially-projected growth in sales of devices to consumers in Japan in the first quarter, as we are now reaching more conservative adult smoker segments that may require, at least at first, slightly more time for adoption. Even if this temporary dynamic in Japan persists, we remain on track to double our worldwide in-market sales of heated tobacco units compared to 2017.”
“We are confident in our ability to deliver strong results this year and remain steadfast in our commitment to generously reward our shareholders.”PMI to webcast results
Philip Morris International is due to host a live audio webcast at www.pmi.com/2018Q1earnings from 09.00 Eastern Time on April 19 to discuss its 2018 first-quarter results, which will be issued about 07.00 the same day.
During the webcast, which will be in listen-only mode, CFO Martin King will discuss the results and answer questions from the investment community and news media.
The audio webcast may be accessed also on iOS or Android devices by downloading PMI’s free Investor Relations Mobile Application at www.pmi.com/irapp.
An archived copy of the webcast will be available until 17.00 on May 18 at www.pmi.com/2018Q1earnings.
The slides and script will be available also at www.pmi.com/2018Q1earnings.Cigarette sales fall
Japan Tobacco Inc.’s domestic cigarette sales volume during March, at 7.2 billion, was down by 14.5 percent on that of March 2017, 8.5 billion, according to preliminary figures issued by the company today. The March 2017 figure was down by 20.4 percent on that of March 2016.
Volume during January-March, at 19.5 billion, was down by 15.0 percent on that of January-March 2017, 23.0 billion. The January-March 2017 volume was down by 15.3 percent on that of January-March 2016.
JT’s market share stood at 62.1 percent during March, at 61.4 percent during January-March, and at 61.3 percent during January-December 2017.
JT’s domestic cigarette revenue during March, at ¥43.2 billion, was down by 13.9 percent on its March 2017 revenue, ¥50.1 billion, which was down by 16.4 percent on its revenue of March 2016.
Revenue during January-March, at ¥116.7 billion, was down by 14.4 percent on that of January-March 2017, ¥136.3 billion, which was down by 11.5 percent on its revenue of January-March 2016.Altria to webcast results
The Altria Group is due to host a live audio webcast from 09.00 Eastern Time on April 26 to discuss its 2018 first-quarter business results. The company will issue a press release containing its business results about 07.00 the same day.
During the webcast, chairman, CEO and president Marty Barrington and CFO Billy Gifford will discuss the company’s results and answer questions from the investment community and news media.
The webcast, which will be in listen-only mode, can be accessed at altria.com or through the Altria Investor App.
Pre-event registration is necessary at www.altria.com/webcasts.
An archived copy of the webcast will be available on altria.com or through the Altria Investor App.
The free app is available for download at www.altria.com/irapp or through the Apple App Store or Google Play.Anti-tobacco groups closing
Two award-winning non-profit groups that have led the fight against tobacco in Canada are preparing to close their doors after the money they had expected to receive as part of the most recent federal budget failed to materialize, according to a story by Gloria Galloway for the Globe and Mail.
Galloway reported that the Non-Smokers’ Rights Association (NSRA) and Physicians for a Smoke-Free Canada (PSC) had been limping along on a combination of savings, provincial help, and the work of volunteers since their federal funding was cut by the former Conservative government in 2012.
Health experts and organizations across Canada had expected that the Liberal government’s promise to renew the federal Tobacco Control Strategy, which expired on March 31, would include support for the two organizations.
Instead, the government has said the $11-million that was committed to the strategy this year and the $16-million promised for next year will be used to stop the influx of contraband tobacco and to pay for unspecified ‘targeted actions’ to help Canadians quit smoking.
The full story is at: https://www.theglobeandmail.com/politics/article-two-leading-canadian-anti-tobacco-groups-to-shut-down-after-ottawa/
