India’s Commerce and Industry Ministry is due on April 11 to convene a meeting of all stakeholders, including farmer associations, private companies and government departments, to discuss foreign direct investment (FDI) in the tobacco sector, according to a Press Trust of India story published by Bloomberg.
Currently, FDI is prohibited in respect of the manufacturing of cigars, cigarettes and tobacco substitutes. However, it is permitted within the tobacco sector in respect of technology collaboration in any form, including licensing for franchises, trademarks, brand names and management contracts.
The meeting assumes significance because, in 2016, the Ministry’s Department of Industrial Policy and Promotion floated a proposal to put a complete ban on FDI in the tobacco sector.
The government did not make a decision on the matter due to concerns raised by companies and tobacco farmers’ associations.
The meeting is expected to be attended by officials from government departments as well as local and overseas tobacco farmers’ associations, tobacco companies and business groups.
The Bloomberg story is at: https://www.bloombergquint.com/business/2018/04/08/dipp-calls-meeting-of-stakeholders-on-fdi-in-tobacco-sector.
Category: Financial
India invests in a meeting
JT's domestic volume down
Japan Tobacco Inc.’s domestic cigarette sales volume during February, at 6.2 billion, was down by 16.2 percent on that of February 2017, 7.4 billion, according to preliminary figures issued by the company today. The February 2017 figure was down by 12.4 percent on that of February 2016.
Volume during January-February, at 12.3 billion, was down by 15.3 percent on that of January-February 2017, 14.5 billion. The January-February 2017 volume was down by 12.1 percent on that of January-February 2016.
JT’s market share stood at 61.8 percent during February, at 61.1 percent during January-February, and at 61.3 percent during January-December 2017.
JT’s domestic cigarette revenue during February, at ¥36.9 billion, was down by 15.3 percent on its February 2017 revenue, ¥43.6 billion, which was down by 9.1 percent on its revenue of February 2016.
Revenue during January-February, at ¥73.5 billion, was down by 14.7 percent on that of January-February 2017, ¥86.2 billion, which was down by 8.4 percent on its revenue of January-February 2016.SEKAP fine suspended
The First Instance Administrative Court of Komotini, Greece, has suspended a €44 million (US$54.2 million) fine imposed on SEKAP SA for alleged customs violations dating from 2008, prior to its acquisition by the Russian-Greek investor Ivan Savvidis, according to a Greek Reporter story relayed by the TMA.
The court accepted the company’s request and suspended the execution of the notice of the Xanthi customs office for the payment of a fine of €38 million (US$46.8 million), which had increased to €44 million with the accumulated penalties for being in arrears since 2009.
Employees of the tobacco company supported the suspension application filed by Savvidis’ lawyer Alexandros Lykourezos, arguing that the company would be forced to go bankrupt if the fine were not overturned.Tax structure hits TTM
The state-run Thailand Tobacco Monopoly (TTM) is expecting to make the first loss of its 79-year history following the imposition of new excise tax rates that, it claims, have benefited importers of foreign cigarettes, according to a story in The Bangkok Post.
The TTM will make a loss of about 1.5 billion baht this year because it has not been able to reduce its spending in light of the new tax, which was implemented in September, said Daonoi Suttiniphapunt, the company’s MD.
Under the new tax structure, packs of cigarettes with a retail price of more than 60 baht are subject to a 40 percent levy, while cheaper packs attract a rate of 20 percent.
Daonoi said that the suppliers of some foreign brands had lowered their prices to avoid the high tax. This was possible for them because they bore lower production costs than did the TTM.
It was not financially viable for the TTM to reduce its cigarette prices and, as a result, it had lost market share to its competitors.
At present, TTM’s sales accounted for about 55 percent of the market, down from 80 percent before the tax-structure change.
Daonoi said also that the Finance Ministry-owned state enterprise was shouldering huge costs in relation to employment, unmanufactured tobacco and the development of a new factory, due to be ready in 2020.
The TTM employed more than 3,000 staff, compared with only 1,000 employed by foreign cigarette manufacturers, while the TTM was required to buy domestic tobacco at “unusually high prices”, she said.
The state enterprise is said to be paying growers 22 baht per kg – higher than the market price.
But with the drop in cigarette sales, the TTM is expected to buy 40 percent less tobacco this year than it did last year.
Other spending that contributes to the TTM’s financial state includes running a hospital and investment in a public park inside its factory compound.
Daonoi admitted that liquidity was likely to become an issue from May onward, after which the TTM would seek its first-ever loan.
In the meantime, the TTM has called on the Excise Department to revise the new tax structure.
It is also making preparations to allow it to manufacturer non-TTM brands, and to sell TTM brands overseas.BAT volumes increased
British American Tobacco’s cigarette and tobacco-heating product (THP) volumes during the 12 months to the end of December, at 686 billion, were increased by about 3.2 percent on those of the 12 months to the end of December 2016, 665 billion. On an organic basis, volumes fell by about 2.6 percent.
Tobacco volumes which include as well as cigarettes and THPs, other tobacco products whose volumes are stated in cigarette stick equivalents, were increased by about 3.6 percent, from 689 billion to 714 billion.
In a preliminary announcement about its results for the year to the end of December 2017, which saw it complete its acquisition of Reynolds American Tobacco in July, BAT said that its market share in its key markets had increased last year by 0.4 of a percentage point. This growth was said to have been driven by the group’s global drive brands (GDB), including THPs, whose market share, excluding the US, had increased by 1.1 percentage points on volume up by 7.6 percent on an organic basis.
The company’s cigarette and THP volumes were increased in its Western Europe region from 120 billion to 122 billion. But they were down in its EEMEA (Eastern Europe, Middle East and Africa) region from 236 billion to 228 billion, down in its Americas region from 113 billion to 107 billion, and down in its Asia-Pacific region from 196 billion to 193 billion.
BAT’s revenue during the year to the end of December, at £20,292 million, was increased by 37.6 percent on that of 2016, £14,751 million; while adjusted organic revenue, at £15,712 million, was increased by 6.5 percent.
Profit from operations, at £6,476, was increased by 39.1 percent; while adjusted organic profit from operations was up by 7.8 percent to £5,910 million.
Diluted earnings per share were up by 634.0 percent to 1,830.0p; while adjusted diluted earnings per share were increased by 14.9 percent to 284.4p.
Dividend per share was up by 15.2 percent to 195.2p.
“The Group delivered another set of strong financial results in 2017, despite a challenging trading environment,” said chief executive Nicandro Durante (pictured). “Following the transformational deal in July 2017, these results benefit from the acquisition of RAI while also demonstrating the strength of the organic business.”
Durante said also that BAT had made “excellent progress” with its next generation product business. “Our flagship THP, glo, first launched in Japan in December 2016, reached 3.6 percent market share by the end of 2017 – having been rolled out nationally from October 2017. Since then, 50 percent of the overall category growth in Japan has been from glo – demonstrating its strong consumer appeal in a very short period. Good initial progress is also being made in our other launch markets of South Korea, Russia, Canada, Romania and Switzerland.
“In the vapor category, Vype is now present in nine markets and we remain market leader in the UK, with Vype and Ten Motives combined delivering around 40 percent share of measured retail in December 2017. We also lead the vapor category in Poland. In the US, the Vuse range of products continues to have a significant presence in the market. We see the rapidly developing vapor category, as a whole, contributing significantly to our long-term growth ambitions in NGPs.”Zimbabwe moving on
Zimbabwe’s central bank has said it plans to sell bonds to allow citizens living outside the country to invest in the country’s tobacco and gold, according to a story by Godfrey Marawanyika and Renee Bonorchis for Bloomberg News.
The Reserve Bank of Zimbabwe said it would provide more information on the diaspora bonds ‘in due course’.
At the same time, banking rules are being introduced with the intention of encouraging money flows and exports.
Under the rules, lenders must give exporters access to all of the foreign currency they received from selling goods, within 14 days of the funds being deposited.
And small, non-corporate exporters shipping more than $2,000 of goods no longer need fill in certain forms.
The new policies and plans come three months after the former president was replaced by the former deputy president, Emmerson Mnangagwa, who is said to be on a drive to revive the economy and attract investment.
The new administration will allow white farmers to apply for 99-year leases on land, up from five years previously.
And it has pledged to compensate them for improvements they made to land that was seized.
The Bloomberg story is at: https://www.bloomberg.com/news/articles/2018-02-19/zimbabwe-plans-gold-tobacco-diaspora-bonds-as-bank-rules-change.Taxing problems in Kenya
British American Tobacco Kenya has said further increases in excise duty could put its products out of consumers’ reach and deal a hard blow to its profitability, according to a story in The Business Daily.
BAT Kenya, which on Friday reported a 21.2 percent drop in net profit to Sh3.3 billion, said unpredictable tax increases were a threat to its Kenya business.
“We would encourage the government to have a much more stable tax environment so that their revenues can be more predictable and we can have a more predictable operating environment,” BAT Kenya MD Beverly Spencer-Obatoyinbo said at a media briefing.
“Smaller increases in specific excise rates are easier for us to manage and easier for the consumer to handle and will give consistent revenue gains for the government.”
Tobacco control advocates claim that cigarette tax is too low, and they have been urging the government to raise it from the current Sh2.50 per piece to Sh3.25 per piece.
“Currently, the average growth in the nominal price of a pack of cigarettes is lower than that of kerosene and food, and therefore cigarette smoking is going up,” said Rodgers Kidiya, program officer in charge of research and development at the Nairobi-based International Institute for Legislative Affairs.
The tax-increase proposal, Kidiya said, was based on a predictive model that took into account inflation to show the future prices of products.
The current tobacco excise tax regime was instituted in 2015, but in March last year Treasury Secretary Henry Rotich provided relief to smokers of low-end cigarettes with a cut in excise tax that saw the price of non-filter cigarettes fall by 70 cents.
Rotich split the tax structure for cigarettes keeping it at Sh2.50 per piece for cigarettes with filters and introducing a new rate of Sh1.80 for those without.
The two types of cigarettes had been attracting a uniform tax of Sh2.50 per piece.SM snus volumes up
Swedish Match’s volume shipments of snus in Scandinavia during the 12 months to the end of December, at 247.6 million cans, were increased by three percent on those of the year to the end of December 2016, 241.3 million cans.
But despite the volume increase, SM’s share of Sweden’s snus market fell by 2.1 percentage points, from 67.3 percent during 2016 to 65.2 percent during 2017. And it’s share of Norway’s snus market fell by 1.4 percentage points to 52.1 percent.
Meanwhile, SM’s volume shipments of moist snuff on the US market during 2017, at 127.4 million cans were down by three percent on those of 2016, 131.4 million cans.
Also in the US, the company’s volume shipments of cigars in 2017, at 1,629 million, were increased by 11 percent on those of 2016, 1,472 million.
But, during the same period, volume shipments of chewing tobacco, excluding contract manufacturing volumes, at 6,341,000 pounds, were down by five percent from 6,709,000 lb.
SM’s worldwide shipments of matches during 2017, at 65.0 billion sticks, were down by 10 percent on those of 2016, 72.0 billion sticks.
During the same period, worldwide shipments of lighters fell by eight percent from 399.2 million to 368.1 million.
In announcing its results, SM said that, in local currencies, sales had increased by six percent for the fourth quarter and by thee percent for the full year. Reported sales had increased by two percent to SEK4,044 million for the fourth quarter and by four percent to SEK16,101 million for the full year.
In local currencies, operating profit from product areas (excluding larger one-off items and a share of the net profit of the Scandinavian Tobacco Group [STG] in 2016) increased by 15 percent for the fourth quarter and by five percent for the full year. Reported operating profit from product areas increased by nine percent to SEK1,044 million for the fourth quarter and by six percent to SEK4,218 million for the full year.
Operating profit amounted to SEK1,179 million for the fourth quarter and to SEK4,591 million for the full year.
Profit after tax amounted to SEK904 million for the fourth quarter and to SEK3,400 million for the full year.
Earnings per share amounted to SEK5.10 for the fourth quarter and to SEK18.88 for the full year. Earnings per share excluding larger one-time items, dividends from STG in 2017 and share of net profit in STG in 2016 increased by 17 percent to SEK4.24 for the fourth quarter and by 14 percent to SEK16.39 for the full year.
“I am very pleased with Swedish Match’s performance in 2017 – a year of solid growth, with higher sales and operating profit from product areas,” said CEO Lars Dahlgren.
“Investments that we have made within our consumer insights and R&D functions have strengthened our portfolio of smokeless offerings, and we have supplemented organic efforts through acquisitions.
“In recent years, global tobacco competitors have signaled a shift in their strategic agendas to acknowledge the role of less harmful alternatives. With our vision of a world without cigarettes and long history of offering tobacco consumers significantly less harmful products, Swedish Match has pioneered this effort.”Seeking new alliances
Alliance One International’s volume sales during the nine months to the end of December, at 255.8 million kg, were 1.7 percent up on those of the nine months to the end of December 2016.
In announcing its nine-months and third-quarter results, the company said the higher volume was made possible by South America’s crop having been returned to a more normal level after the weather-affected, smaller crop of the previous year, and by the timing of shipments in North America, offset by volume decreases in Africa caused by unhelpful weather, primarily in Malawi.
Total sales and other operating revenues were said to have increased by $97.0 million to $1,202.1 million because of a 7.5 percent increase in the average sales price brought about by a favorable product mix, primarily in South America, North America, Asia and Europe, and because of the increase in volume sales.
Average tobacco costs per kg increased by 7.9 percent because of the product mix and the impact of European currency movements, partially offset by lower conversion costs.
‘Gross profit increased 14.7 percent to $171.5 million and gross profit as a percentage of sales improved to 14.3 percent from 13.5 percent last year,’ Alliance said. ‘The increase in gross profit was driven by revenues increasing by 8.8 percent with total costs of goods and services sold increasing by 7.9 percent. The larger South America crop size this year was the primary driver of processing and other revenues increasing 2.1 percent, with processing costs decreasing 10.1 percent from lower conversion costs.’
President and CEO Pieter Sikkel (pictured) said, fiscal year 2018 continued to progress in line with the company’s expectations. “We achieved solid sales growth during the third quarter when compared to last year,” he said. “Our volume sold has increased, as crop sizes have returned to more normal levels in many key markets despite reduced crop sizes in Africa.
“We are pleased with this quarter’s results and with the continued progress against our key initiatives and strategic objectives.”
Sikkel said he was excited to announce that Alliance One had embarked on an ambitious transformation plan called ‘One Tomorrow’. “This initiative will drive future growth opportunities and reshape our brand as the trusted provider of responsibly produced, independently verified, sustainable, and traceable agricultural products and services,” he said. “As part of our ‘One Tomorrow’ long-term business strategy, we are actively developing new business lines and building upon the strength of our core operations.
“Most of our new business lines focus on products that are value-added or require some degree of processing. These products generally have higher margin potential than our core business and play well to our strengths.
“In January, we successfully acquired majority stakes in two new joint ventures. The extension into growth segments, namely e-liquids, industrial hemp and cannabis, expands Alliance One’s presence in higher-margin, fast-growing categories.
“We intend to broaden our business portfolio over the next three to four years by focusing on consumer-driven agricultural products, with increased operating margins when compared to our historical leaf processing business.
“Consistent with our commitment to growth and incremental to our core leaf earnings, our goal is to generate a significantly increasing portion of our profit from new, higher-margin businesses by 2020.”Presentation to be webcast
The Altria Group is due to host a webcast of its business presentation at the annual Consumer Analyst Group of New York conference in Boca Raton, Florida, starting about 13.00 Eastern Time on February 21.
The webcast, which will be in listen-only mode, will feature a presentation by chairman, CEO and president, Marty Barrington, and other members of the company’s senior management team.
Directions for the necessary pre-event registration are 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.
