Tag: Featured

Stories featured at the top of tobaccoreporter.com

  • Malaysia: Action Urged Against Illicit Market

    Malaysia: Action Urged Against Illicit Market

    Photo: BAT

    British American Tobacco (BAT) Malaysia has urged its shareholders to speak up against the illicit trade in cigarettes, which has severely impacted the company’s financial performance in the country, reports the New Straits Times.

    BAT Malaysia’s profit from operations declined 24.9 percent to MYR478 million ($111.8 million) for the financial year 2019.

    According to BAT Malaysia Managing Director Jonathan Reed, continued growth of the black market has forced the company to aggressively manage its cost base.

    “This is not sustainable in the long term,” said Reed at BAT Malaysia’s 59th annual general meeting on June 15. “To effectively stop the black market, more drastic and radical actions are required.”

    For 2020, BAT Malaysia said its growth strategy would depend on the recovery of the legal tobacco market, a regulated nicotine landscape, sensible fiscal policies and a resolution to the affordability issues affecting consumers.

    “We are ready to invest our resources to continue tackling this issue,” said Reed. “However, full recovery can only happen if we are able to work hand-in-hand with all relevant parties to implement effective structural reforms to manage the extraordinarily high levels of illegal trade.”

  • Hong Kong: Vapor Ban Threat Lifted

    Hong Kong: Vapor Ban Threat Lifted

    Photo: carloyuen from Pixabay

    Asian consumer advocacy groups and tobacco harm reduction advocates have welcomed Hong Kong Legislative Council’s (Legco) decision to suspend discussions on a proposed ban of vapor products, saying this will provide smokers with safer smoke-free alternatives.
     
    On June 2, Legco’s bills committee on smoking announced it had ceased discussions over the proposed ban on electronic cigarettes, heat-not-burn tobacco products (HTPs) and other electronic nicotine-delivery systems.
     
    Some committee members strongly opposed the measure, citing scientific studies showing that e-cigarettes, HTPs and the like have lower levels of toxicants than combustible cigarettes.
     
    IQOSER, a heated-tobacco concern group in Hong Kong, said the end of discussions on the proposed ban would hopefully bring lawmakers’ attention to the problem of smoking in the territory.
     
    “Smoking incidence remains at more than 10 percent in Hong Kong, which means a tenth of our population is exposed to the health risks brought about by toxicants found in tar, the by-product of tobacco smoke,” said Joe Lo of IQOSER, a member of the Coalition of Asia Pacific Tobacco Harm Reduction Advocates.

  • Sivignon to Join Imperial Brands Board

    Sivignon to Join Imperial Brands Board

    Image: Skypixel | Dreamstime.com

    Pierre-Jean Sivignon will join the board of Imperial Brands on July 1, 2020.
     
    Sivignon is an experienced finance professional, having held chief financial officer positions at Faurecia, a leader in automotive technology, Philips, a health technology company, and most recently Groupe Carrefour, a global retailer, where he was also deputy CEO, advisor to the Carrefour chair and CEO.
     
    Sivignon is currently a nonexecutive director of Vista Oil & Gas, which is listed on the Mexican Stock Exchange and the New York Stock Exchange. He has previously held nonexecutive directorships with Imerys and Technip.
     
    “We are delighted to welcome Pierre-Jean to the Imperial Brands board,” said Imperial Brands Chair Therese Esperdy. “His international financial expertise in customer-facing businesses will be of great value to us, and he joins the board at an exciting time for the company.”
     
    Sivignon will also join Imperial Brands’ audit committee effective July 1, 2020.

  • Moody’s: Tobacco Has High Social Credit Risk

    Moody’s: Tobacco Has High Social Credit Risk

    Illustration: Moody’s

    With $175 billion of rated debt, the tobacco industry has a high “social credit risk,” according to a new analysis by Moody’s Investors Service analyzing 82 global sectors.
     
    “While combustible tobacco’s health dangers are the main reason for the sector’s high social credit risk, other drivers include customer relations, responsible production and demographic and societal trends,” said Roberto Pozzi, Moody’s senior vice president and author of the report.
     
    Alternative products, he added, may help offset the negative credit impact of social risks.
     
    Last week, Moody’s kicked off its 14-part series on social risks impacting credit in high-risk sectors with a look at the global gaming industry. The series examines the credit impact of social issues in multiple industries with roughly $8 trillion in combined rated debt.

  • Pyxus International Files For Chapter 11

    Pyxus International Files For Chapter 11

    Photo: Darren4155 | Dreamstime.com

    Pyxus International announced today that it and its subsidiaries, Alliance One International, Alliance One North America, Alliance One Specialty Products and GSP Properties, have filed voluntary petitions for relief under Chapter 11 of the U.S. bankruptcy code in the U.S. Bankruptcy Court for the District of Delaware as part of a “prepackaged” Chapter 11 Case.

    In connection with the filing, the company entered into a restructuring support agreement (RSA) with noteholders holding more than 92 percent in principal amount of the company’s first lien notes and more than 67 percent in principal amount of its second lien notes. In addition, the company’s receivables financing lenders and certain key foreign lenders have granted waivers and amendments under their respective facilities, demonstrating significant global financial support for the company.

    Under the terms of the RSA, Pyxus’ second lien noteholders will convert approximately $635 million of the company’s debt into equity or cash, and its first lien noteholders will, among other things, extend the maturity date of their existing notes by four years. To implement the financial restructuring contemplated under the RSA, the company commenced solicitation of a prepackaged Chapter 11 plan of reorganization and thereafter filed for Chapter 11 to restructure its debt and delever its balance sheet.

    The prepack plan contemplates that all outstanding shares of Pyxus common stock and rights to acquire Pyxus common stock will be cancelled and each holder of outstanding Pyxus common stock will be entitled to receive its ratable share of $1 million in cash provided that such holder does not opt out of the third-party releases contained in the prepack plan or object to the prepack plan.

    The Chapter 11 process does not include the company’s international subsidiaries or affiliates and Pyxus anticipates continuing to operate its worldwide operations in the ordinary course during the proceeding as it restructures its balance sheet. The terms of the restructuring contemplate paying, among others, all vendors and foreign lenders, in full.

    In addition, Pyxus has secured commitments for a $206.7 million debtor-in-possession financing facility (DIP facility) from certain existing noteholders. Proceeds from the DIP facility will be used to refinance the company’s existing asset-based revolver, for working capital and general corporate purposes, and to pay expenses incurred in connection with the Chapter 11 cases. Subject to court approval, the DIP facility, combined with the company’s projected cash flows, are expected to provide liquidity to support its operations during the restructuring process, allowing the company to emerge with a strengthened balance sheet to complement its operations and future growth plans.

    “This agreement with our noteholders represents a significant milestone in the ongoing process to transform our business as we continue to focus on driving long-term, sustainable growth and greater efficiency,” said Pieter Sikkel, Pyxus’ president and CEO. “We will continue to provide our customers with the quality products and services they are accustomed to without interruption and work with our business partners throughout the Court-supervised process. We also expect there will be no impact to vendors. As we look to quickly re-emerge from this process, we expect to be a stronger company, better able to execute on our long-term strategy and positioned for long-term growth and success.”

    Simpson Thacher & Bartlett is serving as legal counsel, and Lazard and RPA Advisors are serving as financial advisors to Pyxus.

  • Reintroduction of Zim Dollar Dampens Cigarette Sales

    Reintroduction of Zim Dollar Dampens Cigarette Sales

    Zimbabwe’s previous currency was rendered worthless by hyperinflation.
    Photo: Taco Tuinstra

    The reintroduction of the Zimbabwean dollar late last year has taken a toll on legal cigarette sales, reports New Zimbabwe.

    Market leader British American Tobacco experienced a 17 percent drop in sales for the fiscal year that ended Dec. 31, 2019. The company attributed the decline to the weakening of the Zimbabwe dollar, which has eroded disposable incomes and forced people to cut down on smoking.

    “It was a challenging year for the business mainly driven by significant changes to the macroeconomic policies and in particular, the introduction of the Zimbabwe dollar that was floated against the U.S. dollar,” said company Chair Lovemore Manatsa.

    Manatsa said the local currency devalued against major trading currencies further impacting consumer disposable incomes, which saw inflation increasing to 521 percent by the end of December 2019.

    Zimbabwe replaced its currency in 2009 with the U.S. dollar to stop hyperinflation. In November 2019, Zimbabwe’s central bank reintroduced the currency to ease a severe cash shortage, but the new Zimbabwe dollar too is quickly losing value.

  • Australian Regulator Rejects Tobacco Heating Products

    Australian Regulator Rejects Tobacco Heating Products

    Photo: PMI

    Australia’s Therapeutic Goods Administration (TGA) on June 10 in an interim decision rejected a request by Philip Morris Australia to adjust nicotine regulations in a manner that would allow the company’s heat-not-burn product (HTP) reach store shelves.

    Currently, only combustible tobacco products such as cigarettes and cigars are permitted to be sold in Australia.

    Philip Morris (PM) spokesperson Simon Breheny called the decision disappointing. “It puts Australia at odds with many other countries who have decided to regulate heated-tobacco and smoke-free alternatives,” he said.

    “The right decision was made,” said Becky Freeman, a researcher from Sydney University’s School of Public Health. “They [HNB products] are not some miracle product that reduces smoking.”

    While Breheny noted that PM will not challenge the interim decision, he maintained that a regulatory mechanism is the appropriate way forward. “People who are looking for these alternatives will continue to make the case for why they are important,” he said.

    The TGA is scheduled to release its full final decision in August.

  • Industry Outlook ‘Stable,’ Says Moody’s

    Industry Outlook ‘Stable,’ Says Moody’s

    Photo: Tobacco Reporter archive

    After declining in 2020, the global tobacco sector’s operating profit will likely rebound in 2021, with growth of between 5 percent and 10 percent next year, according to Moody’s.  

    In a new report, the business and financial services company assesses the outlook for the tobacco industry in an unprecedented business environment. Key findings include:

    • Long-term impact of coronavirus on consumption too early to gauge. Tobacco sales could decline because of reduced demand or because consumers switch to lower priced products. But it could also speed up the move to alternative products, accelerating the industry’s transformation. Regulations may become increasingly restrictive, or regulators might delay developing risk-proportionate regulatory frameworks.
    • Leverage ratios will continue to improve despite high dividend payouts and economic slowdown. Dividends will remain high and absorb most operating cash flow. However, Moody’s analysts expect companies to use free cash flow and available cash balances to repay pending debt maturities.
    • Operating profit to decline in 2020 but rebound in 2021, keeping outlook stable. Despite increased uncertainty caused by the coronavirus pandemic, Moody’s analysts expect demand to remain fairly stable in the next two years. Some moderate risks include volume declines in duty-free sales, slower conversion of adult smokers to alternative products, manufacturing and supply chain disruptions and increased currency volatility.
    • Cigarette sales volumes to keep falling but price rises still offset the impact. Traditional cigarette volumes will decline around 5 percent-6 percent in the U.S. and 2 percent-3 percent in the rest of the world excluding China during the next 12-18 months. But mid-single-digit percent price increases will continue, and this will more than offset volume declines.
    • Alternative products sales growth to continue despite more regulatory scrutiny. Moody’s analysts expect alternative products sales growth to slow this year but gradually resume into 2021. Alternative products’ market share will remain stable near term because tighter regulatory scrutiny of vaping and the temporary closure of IQOS stores during the lockdowns may impact user acquisition. Increasing regulation will create a barrier to entry and entrench incumbents’ market positions.
  • Stanton to Chair Imperial Brands’ Audit Committee

    Stanton to Chair Imperial Brands’ Audit Committee

    Jon Stanton | Photo: Imperial Brands
    Karen Witts

    Karen Witts has decided to step down as chair of the audit committee and as a non-executive director of Imperial Brands effective June 15, 2020.

    Jon Stanton, who has been a member of the audit committee since May 2019 and has the required relevant financial experience, will succeed Witts as chair of the audit committee.

    “I would like to thank Karen for her significant contribution to the board and its committees over the past six and a half years and wish her well in the future,” said Imperial Brands’ Chair Therese Esperdy.

  • Massachusetts Flavor Ban Boosts Out-of-State Sales

    Massachusetts Flavor Ban Boosts Out-of-State Sales

    Photo: Borgwaldt Flavor

    Tobacco sales in Massachusetts convenience stores are down less than a week after the state’s ban on flavored tobacco took effect, reports CSP Magazine. However, tobacco sellers in neighboring states are reporting an uptick in business.

    On June 1, Massachusetts restricted the sale of flavored combustible cigarettes and other tobacco products—including menthol cigarettes and flavored chewing tobacco—to licensed smoking bars where they can be sold for on-site consumption.

    “We’re down double digits in menthol cigarettes,” said Leo Vercollone, CEO of VERC Enterprises, a retail convenience store/gasoline and carwash group operating in Massachusetts and southern New Hampshire.

    Cigarette and other tobacco product sales were down about 12 percent at his Massachusetts stores compared to last year, Vercollone said. However, in the first few days of June, tobacco sales at two of his stores on the New Hampshire border were up about 40 percent, he said.

    Tobacco sales make up about 15 percent to 30 percent of in-store revenue for c-stores, and menthol sales typically make up about 34 percent of tobacco sales—and more in minority communities and cities, said Jonathan Shaer, executive director of the New England Convenience Store & Energy Marketers Association.

    The effects of the ban, coupled with the devastating effects of Covid-19 on the economy, could mean 800 or more c-stores will permanently close within months, Shaer estimates.

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