Category: Financial

  • Burley in short supply

    Burley in short supply

    Universal Corporation believes that worldwide demand for Burley tobacco might exceed supply.

    “We are currently forecasting worldwide Burley tobacco production levels for fiscal year 2018 of about 510 million kg, a reduction of approximately 13 percent from fiscal year 2017 levels,” said George C. Freeman, chairman president and CEO. “As a result, we believe that demand for Burley tobacco may slightly exceed supply.”

    Freeman was announcing Universal’s results for the first quarter of fiscal year 2018, which ended on June 30.

    Universal reported net income of $3.6 million, or $0.14 per diluted share, for the quarter. Those results were up $9.1 million from a net loss of $5.5 million, or $0.40 per diluted share, for the first quarter of fiscal year 2017.

    ‘Operating income of $6.6 million for the quarter ended June 30, 2017, improved $14.6 million compared to an $8.0 million operating loss for the quarter ended June 30, 2016,’ the company reported. ‘Similarly, segment operating income was $6.1 million for the first quarter of fiscal year 2018, up $14.3 million compared to the same period last year, mainly as a result of earnings improvements in the Other Regions segment, partially offset by earnings declines in the North America and Other Tobacco Operations segments.

    ‘Revenues of $284.6 million for the quarter ended June 30, 2017, decreased by $10.9 million, or four percent, on lower total volumes and a less favorable product mix.’

    Freeman said that crop purchases were essentially completed in Brazil and were progressing well in Africa.

    “Overall crop qualities are good,” he said. “We expect increased volumes in Brazil to continue to positively affect earnings throughout this fiscal year. At the same time, greater reductions than expected in Burley crop sizes in Africa and continued challenging market conditions in Tanzania will reduce our volumes sold from that region.”

  • AOI volume stable

    AOI volume stable

    In the three months to the end of June, Alliance One International (AOI) sold about 61.2 million kg of tobacco, about the same amount as it had sold during the three months to the end of June 2016, even though South-American shipments were ‘noticeably reduced’ because there had been only ‘minimal carryover’ of the smaller, El Niño-affected 2016 crops.

    In announcing AOI’s first-quarter results to the end of June, president and CEO Pieter Sikkel said revenue had improved by 6.1 percent or $15.9 million to $277.0 million on that of the quarter to the end of June 2016 due to a 4.8 percent increase in average sales price that was driven by a higher ratio of lamina/by-products sales.

    “Additionally,” he said, “at quarter end, our uncommitted inventory reached a seven year low just inside the mid-point of our stated target range of $50.0 to $150.0 million.

    “Due to selling mainly prior year crops during the quarter that were impacted by currency and smaller crops sizes last year, gross profit decreased $5.4 million to $28.6 million. Excluding the impact of currency movement in Other Regions, gross profit would have been consistent with the prior year.”

    Looking ahead, Sikkel said fiscal year 2018 was progressing favorably and in line with expectations. Excluding Malawi, which had a much smaller crop this year, global market conditions were positive.

    Weather patterns were good, supporting better growing conditions; so that, in key markets where AOI was currently buying, crop sizes had returned to more normal levels.

    Later, Sikkel said that AOI’s customers were focused on enhancing global-supply-chain sustainability and driving positive change in nicotine consumption habits with reduced risk products.

    “Alliance One is well positioned to continue to meet customer requirements for traditional products with directed agronomy investments in systems and people,” he said. “Such investments, as well as others, uniquely position our company as a key supplier for new products our customers are developing and we will continue to invest where appropriate returns should be achievable…”

  • JT’s volume plummets

    JT’s volume plummets

    Japan Tobacco Inc. reported today that its domestic cigarette sales volume during the six months to the end of June, at 46.8 billion, was down by 11.2 percent on that of the six months to the end of June 2016, 52.7 billion.

    At the same time, industry volume was said to have been down by 11.0 percent from 86.2 billion to 76.8 billion.

    JT said that its volume and that of the industry had been affected mainly by the expansion of the tobacco vapor category and a continuing market decline.

    JT’s market share during the period was said to have been 61.0 percent, unchanged from the level of the previous year.

    Core revenue for the domestic tobacco business fell by 7.6 per cent to ¥294.4 billion and adjusted operating profit was down by 7.4 percent to ¥12.0 billion.

    Meanwhile, Japan Tobacco International’s total tobacco (including cigarettes, fine-cut, cigars, pipe tobacco and snus, but excluding water-pipe tobacco, emerging products and contract manufactured goods) shipment volume during the six months to the end of June, at 193.2 billion, was down by 3.3 percent on that of the six months to the end of June 2016, 199.7 billion.

    JTI’s Global Flagship Brand (GFB) shipment volume was unchanged at 140.8 billion.

    JT reported that a strong performance, primarily in Iran and Taiwan, had been unable to offset the impact of industry volume contractions in several markets and the unfavorable inventory comparisons of the first quarter. GFB shipment volume had remained stable because of market share gains in several key markets.

    JTI’s core revenue fell by 1.2 percent to ¥577.2 billion, while adjusted operating profit rose by 1.0 percent to ¥195.1 billion.

    “In the first half, we achieved continued growth in the group’s adjusted operating profit at constant currency driven by the international tobacco and pharmaceutical businesses, despite an increasingly uncertain and challenging operating environment,” said Mitsuomi Koizumi, president and CEO of JT, in commenting on the consolidated results.

    “We’ve seen high earnings growth in the international tobacco business, for which our well-planned and executed cost optimization initiative is bearing fruit, as well as higher royalty revenues in the pharmaceutical business which also contributed to the group’s profit increase.

    “In the Japanese tobacco business, cigarette industry volume decline puts further pressure on us, resulting in adjustments to our business performance.

    “In the meantime, our promising tobacco vapor product, Ploom TECH, continues to receive strong interest from consumers in Tokyo, where we launched at the end of June. Given the unique features of Ploom TECH as well as our commitment and resources, we are confident to win in the increasingly competitive Japanese tobacco vapor category in the mid-term.

    “As announced, 2017 has proved to be a particularly difficult year for us, however, we remain committed to investing for future sustainable profit growth and will continue to do so during the rest of this year.”

  • Earnings hit in Indonesia

    Earnings hit in Indonesia

    The earnings of Indonesia’s listed cigarette producers are expected to remain under pressure for the remainder of this year, according to a story in Indonesia Investments.

    The companies, the story said, would face big challenges this year from fierce competition for market share, from rising taxes and from anti-tobacco regulations.

    Of the four publicly-listed cigarette manufacturers in Indonesia, only Gudang Garam had reported growing net sales and profit during the first half of the year. HM Sampoerna and Wismilak Inti Makmur had seen their sales and net profits decline, while Bentoel was yet to release its results.

    A finance ministry regulation from January 1 pushed the value-added tax on cigarettes up to 9.1 percent. And later that month cigarette excise tax was increased by an average of 10.54 percent.

  • PM USA’s volume down

    PM USA’s volume down

    Philip Morris USA’s cigarette shipment volume during the three months to the end of June, at 30,569 million, was down by 2.9 percent on that of the three months to the end of June 2016, 31,470 million.

    Marlboro shipments were down by 2.9 percent to 26,157 million; shipments of other premium brands fell by 6.6 percent to 1,550 million; while shipments of discount brands decreased by 0.5 percent to 2,862 million.

    PM USA’s share of the retail cigarette market during the three months to the end of June, at 50.8 percent, was down by 0.4 of a percentage point from that of the three months to the end of June 2016. Marlboro’s share, at 43.5 percent, was down by 0.3 of a percentage point; the share of its other premium brands was down by 0.1 of a percentage point to 2.7 percent; while the share of the company’s discount brands was unchanged at 4.6 per cent.

    The Altria Group yesterday published its second-quarter and first-half results for 2016.

    Middleton’s cigar shipment volume during the three months to the end of June, at 406 million, was increased by 13.1 percent on that of the three months to the end of June 2016, 359 million. Black & Mild brand shipments were up by 13.6 percent to 402 million, while shipments of other brands fell by 20.0 percent from five million to four million.

    USSTC’s smokeless-products shipment-volume during the three months to the end of June, at 221.0 million cans and packs, was up by 1.4 percent on that of the three months to the end of June 2016, 217.9 million.

    Shipments of Copenhagen were up by 2.6 percent to 137.5 million; those of Skoal were down by 1.2 percent to 65.8 million; while those of other brands were increased by 2.3 percent to 17.7 million.

    USSTC’s share of the US market for smokeless products during the three months to the end of June, at 54.1 percent, was down by 0.8 of a percentage point from that of the three months to the end of June 2016. Copenhagen’s share was up by 0.7 of a percentage point to 34.1 percent; Skoal’s share was down by 1.4 percentage points to 16.7 percent; while the share of other brands was down by 0.1 of a percentage point to 3.3 percent.

    Meanwhile, PM USA’s cigarette shipment volume during the six months to the end of June, at 59,296 million, was down by 2.8 percent on that of the six months to the end of June 2016, 61,009 million.

    Marlboro shipments fell by 2.8 percent to 50,852 million; shipments of other premium brands fell by 5.5 percent to 3,000 million; while shipments of discount brands were down by 1.8 percent to 5,444 million.

    Middleton’s cigar shipment volume during the six months to the end of June, at 773 million, was increased by 12.7 percent on that of the six months to the end of June 2016, 686 million. Black & Mild brand shipments were up by 14.0 percent to 765 million; while shipments of other brands fell by 46.7 percent to eight million.

    USSTC’s domestic, smokeless-products shipment-volume during the six months to the end of June, at 416.8 million, was down by 1.7 percent on that of the six months to the end of June 2016, 424.0 million. Copenhagen shipments were up by 1.2 percent to 262.0 million; Skoal shipments were down by 7.4 percent to 121.4 million; while shipments of other brands were down by 2.1 percent to 33.4 million.

    Altria’s second-quarter reported diluted earnings per share (EPS) increased by 22.6 percent to $1.03, and its second-quarter adjusted diluted EPS, which excludes the impact of special items, increased by 4.9 percent to $0.85.

    Altria’s first-half reported diluted EPS increased by 19.0 percent to $1.75, and its first-half adjusted diluted EPS increased by 3.3 percent to $1.58.

    “Based on strong tobacco operating company performance, Altria delivered solid results in the second quarter and first half of 2017,” said Marty Barrington, Altria’s chairman, CEO and president.

    “The smokeable products segment generated strong income growth despite a large cigarette excise tax increase in California, and the smokeless products segment has largely rebounded from its first-quarter voluntary product recall.

    “We continued to focus on rewarding shareholders, paying out nearly $2.4 billion in dividends and repurchasing $1.6 billion in shares in the first half of 2017. Today we also are announcing a $1 billion expansion of that program.

    “Our business fundamentals remain strong.  We believe we are well-positioned for the second half of the year and continue to expect adjusted diluted EPS growth to be weighted to the second half. Thus, we are reaffirming our 2017 full-year adjusted diluted EPS growth guidance of 7.5 percent to 9.5 percent.”

  • Prices linked to poverty

    Prices linked to poverty

    A recent study has found a correlation between US state and local jurisdictions that increase cigarette excise taxes and the number of households in those jurisdictions that apply for food stamps for the first time, according to a National Public Radio (NPR) story relayed by the TMA.

    The study found that on average, a 56 percent increase in cigarette taxes resulted in seven percent of eligible unenrolled households joining the program.

    The study was discussed on the July 25 episode of NPR’s Morning Edition: http://www.npr.org/2017/07/25/539183590/hidden-brain-cigarette-taxes.

  • BAT’s volume down

    BAT’s volume down

    British American Tobacco’s cigarette volume during the six months to the end of June, at 314 billion, was down by 5.6 percent on that of the six months to the end of June 2016.

    Volume, at 58 billion, was increased by 1.7 percent in the company’s Western Europe region, but it was down in each of its other three regions: in its Asia Pacific region by 9.5 percent to 95 billion; in its Americas region by 5.3 percent to 53 billion; and in its EEMEA (Eastern Europe, the Middle East and Africa) region by 5.3 percent to 108 billion.

    BAT reported that group cigarette volume from subsidiaries (excluding associates and joint ventures) fell by 5.6 percent to 314 billion, or by 5.8 percent on an organic basis, as growth in Bangladesh, Gulf Co-operation Council countries, Vietnam and Nigeria was more than offset by market contractions in Pakistan, Ukraine, Iran, Brazil, Indonesia and Japan. The company said that its market share had increased by 0.30 of a percentage point, driven by the continued growth of its Global Drive Brands, whose market share had risen by 0.50 of a percentage point, albeit on volume that was by 1.3 percent down.

    Of the drive brands, Dunhill’s volume fell by 4.5 percent and its market share was lower by 0.10 of a percentage point; Kent’s volume was 1.6 percent lower while its market share was up by 0.15 of a percentage point; Lucky Strike’s volume was up by 12.4 percent and its market share was increased by 0.20 of a percentage point; Pall Mall’s volume fell by 9.6 percent while its market share grew by 0.10 of a percentage point; and Rothmans’ volume grew by 6.2 percent and its market share was up by 0.15 of a percentage point.

    Meanwhile, the volume of BAT’s other international cigarette brands fell by 7.0 percent, as sales growth in State Express 555, in Vietnam, and Shuang Xi, mainly in Russia, was more than offset by lower volumes of Viceroy in Turkey and Venezuela, Peter Stuyvesant in South Africa and Vogue in Russia, South Korea and Canada.

    BAT’s revenue, calculated at constant rates of exchange during the six months to the end of June, at £6,901 million, was said to be up by 3.5 percent on that of the six months to the end of June 2016. It was up by 15.7 percent to £7,717 million at current rates.

    Profit from operations was up by 3.7 percent to £2,295 million at constant rates of exchange, and by 16.3 percent to £2,574 million at current rates.

    Basic earnings per share were down by 15.3 percent to 121.8p.

    In announcing the half-year results, CEO, Nicandro Durante, said the performance of the group in the first six months of the year had been in line with expectations and demonstrated the good organic progress the company was making.

    “The relative weakness of sterling led to a significant tailwind on our reported results, with revenue 15.7 percent higher and profit from operations up 16.3 percent at current rates of exchange,” he said. “Excluding the translational tailwind and the adjusting items, adjusted revenue and adjusted profit from operations were both up, 2.5 percent and 3.2 percent respectively at constant rates of exchange.”

    Durante said that BAT had made good progress with its next-generation-product business and was now present in 15 markets worldwide with its vapor products and THP [tobacco-heating product]. “In the Japanese city of Sendai, glo continues to perform exceptionally well, reaching an estimated 8 percent share and with one in three smokers in Sendai having purchased glo,” he said. “We have recently expanded our coverage to Tokyo, Miyagi and Osaka and national rollout in Japan is planned for October 2017. While it remains early days, the initial results in Tokyo are excellent, with performance ahead of [that of] Sendai over the same period. We are also now present in Canada (Vancouver) and nationally in Switzerland, with very encouraging early signs.

    “To support our on-going glo expansion plans, and to meet the increasing demand, investment in Neostik production capacity is taking place in South Korea and Russia.

    “We are the largest vapor company in the world, with market leadership in the US, through Vuse, and in Poland and the UK, with the latter driven by the two fastest growing vapor brands in the market, Vype and Ten Motives. Vype is now present in 10 markets and, whilst still immaterial in the context of the group, our European vapor business grew with turnover up strongly against [that of] the same period last year.”

    Durante said he was delighted that BAT had completed the deal to acquire the balance of Reynolds shares on July 25.

    He said the company was on course to deliver another good year.  “We continue to expect profit growth to be weighted to the second half of the year, which will be moderated by the continued roll out of NGP and is against a strong prior year comparator in Ukraine,” he said. “Although the challenging environment in a number of markets continues, including in Russia, I am confident that we remain on course to deliver another year of good earnings growth at constant rates of exchange.”

  • Few state quit-aids

    Few state quit-aids

    With no funding for 2017-18, the West Virginia Division of Tobacco Prevention is to sack all but one of the people currently working in its eight-person office, according to an AP State & Local story relayed by the TMA.

    The Division’s director Jim Kerrigan will then be its only employee.

    Kerrigan said that he wanted to keep two programs going: Quitline, a tobacco-cessation hotline; and RAZE, an anti-tobacco education program aimed at teenagers.

    The division is currently operating on state funds carried over from the previous budget year, and on federal grants.

    Juliana Frederick Curry of the American Cancer Society described the cuts as “disheartening” because the state had the highest youth smoking rate and the second-highest adult smoking rate in the US.

  • Focus on the source

    Focus on the source

    An editorial in Common Dreams by Nicholas Freudenberg, a professor of public health at the City University of New York, has called for a change of tobacco control strategy.

    In the editorial, relayed by the TMA, Freudenberg said a direct effort should be made to modify the practices of the tobacco industry rather than focusing on changing the behavior of current and future smokers.

    To change strategies, Freudenberg advises health advocates and officials to respond to four trends:

    (1) industry consolidation;

    (2) interference in government policy-making;

    (3) marketing tactics to vulnerable populations;

    (4) sources of increasing profits.

    According to Freudenberg, in the long run, only approaches that make the industry less attractive to investors will deprive it of its “lifeline of capital”.

  • Profit up at Swedish Match

    Profit up at Swedish Match

    Sales at Swedish Match during the second quarter to the end of June, at SEK4,214 million, were increased by eight percent on those of the second quarter of 2016, SEK3,920 million, the company said on Friday in reporting its first-half results. In local currencies, sales increased by four percent.

    Operating profit from product areas (excluding larger one-off items and SM’s share of the net profit of the Scandinavian Tobacco Group [STG]) increased by eight percent, from SEK1,008 million to SEK1,091 million, and in local currencies by four percent.

    Earnings per share were up from SEK4.01 to SEK4.49, while earnings per share excluding a dividend from STG in 2017 and share of net profit in STG in 2016 were increased from SEK3.72 to SEK4.18.