Imperial Brands will delay the release of its half-year earnings for fiscal year 2020 by two weeks due to the coronavirus outbreak. The company will now release its report on May 19 instead of May 5.
The two-week delay is intended to give auditors more time to prepare and review statements. “With an already tight reporting timetable and with newly appointed auditors, we have therefore agreed with Ernst & Young that the steps both businesses are taking in relation to Covid‐19 mean it will take longer to prepare and review Imperial Brands’ interim financial results,” the company said in a statement.
Japan Tobacco International (JTI) will open a global business service (GBS) center in Manila, Philippines.
The GBS center is expected to help bring jobs to those who lost employment due to the coronavirus outbreak.
“The Manila GBS center becomes JTI’s third global hub after recently opening two similar centers in Warsaw, Poland, and in St. Petersburg, Russia,” JTI said. “The GBS center will employ up to 350 people within the next three years, bringing the total number of JTI employees in the Philippines to 5,000 including those in a manufacturing plant in Batangas province.”
Living up to its reputation for recession resilience, the cigarette industry appears to offer a safe haven in the current uncertain business environment too.
Morgan Stanley analysts Pamela Kaufman and Christine Yang expect cigarette fundamentals to be relatively strong against the current challenging consumer and economic backdrop, reflecting consumer pantry loading, greater ease of smoking while at home and greater consumption from the anxiety brought on by the coronavirus pandemic.
Smoker behaviors and attitudes toward cigarettes do not appear to have been altered by the pandemic, according to Morgan Stanley’s weekly AlphaWise survey of 2,000 consumers.
Nonetheless, Kaufman and Yang expect Philip Morris International (PMI) and the Altria Group to reduce their 2020 guidance along with their first-quarter results
PMI must cope with unfavorable currency exchange rates and moderating IQOS growth in Italy and Russia while Altria must deal with a higher minimum age for tobacco purchases in the United States. While lower gasoline prices may boost cigarette purchases at gas stations, Altria also faces the prospect of consumer downtrading to less profitable cigarette brands due to high U.S. unemployment.
Altria Group today announced Howard Willard’s retirement as chairman of the board of directors and chief executive officer of Altria, effective April 14, 2020. Willard, who was recovering from Covid-19, decided to step down following 28 years of distinguished service to Altria and its subsidiaries.
Following Willard’s retirement, Altria’s board of directors elected Billy Gifford to serve as Altria’s CEO. Gifford has served in numerous senior leadership roles during his more than 25-year career at Altria, including most recently vice chairman and chief financial officer where he was responsible for Altria’s financial functions as well as its core tobacco businesses, sales and distribution business, and consumer & marketplace insights team. Previously he served as Altria’s senior vice president, strategy and business development and president and CEO of Philip Morris USA. Gifford currently serves as a director at Anheuser-Busch InBev SA/NV as one of Altria’s designees.
Altria also announced the board’s decision to separate the roles of chairman and CEO. The board elected Thomas Farrell, formerly the board’s independent presiding director, as independent chairman of the board, effective April 16, 2020.
“The board thanks Howard for his nearly 30 years of distinguished service to Altria and for helping to set the course for Altria’s 10-year vision to responsibly lead the transition of adult smokers to a non-combustible future,” said Farrell. “Our election of Billy as the next CEO reflects the board’s belief that his collaborative leadership style, strategic mindset and deep financial and industry expertise are right to lead Altria towards that future.”
“We believe we’re well positioned to make significant progress against our vision,” said Gifford. “I’m excited to work with our strong leadership team, fantastic employees and key stakeholders to lead Altria forward in its pursuit of the 10-year vision.”
With Gifford’s new position, the board also elected Salvatore Mancuso executive vice president and chief financial officer. Over the course of his more than 29 years with Altria, Mancuso has held a variety of leadership roles across the finance, compliance and strategy & business development organizations. In his most recent role as senior vice president, finance and procurement, Mancuso oversaw Altria’s treasury, tax, audit, financial planning & analysis, and controller functions while also overseeing the procurement and information services teams, among others.
“Sal is a well-respected leader across our finance organization and the Altria family of companies. I look forward to continuing to work closely with him in his new role as our CFO,” said Gifford.
The CEO change does not come as a complete surprise, given the recent underperformance of Altria’s stock. Altria faced multiple setbacks during Willard’s two-year tenure, including two write-downs of its Juul investment and a Federal Trade Commission investigation of the December 2018 deal.
In a note to investors, Morgan Stanley said the leadership change offers Altria the opportunity to create shareholder value by, among other things, accelerating investment in reduced-risk products and accelerating share buybacks.
The U.S. Food and Drug Administration (FDA) has set May 18, 2020, as the deadline for the submission of public comments on 22nd Century Group’s Modified Risk Tobacco Product (MRTP) application.
The application seeks authorization from the FDA to allow 22nd Century to market its reduced nicotine content cigarettes under the brand name VLN, with packs and advertising stating that the product contains 95 percent less nicotine than conventional tobacco cigarettes, as well as related claims regarding reduced nicotine exposure.
“We are very pleased with the progress our team continues to make towards receiving FDA authorization to market our VLN reduced nicotine content cigarettes,” said Michael Zercher, president and chief operating officer of 22nd Century Group. “With the imminent closing of the public comment period, we are hopeful that we will receive a positive decision from FDA allowing us to introduce our reduced nicotine content cigarettes to adult smokers looking to reduce their exposure to nicotine.”
22nd Century’s reduced nicotine content cigarettes enable adult smokers to experience the same taste and smell as conventional cigarettes but with minimal exposure to nicotine. Numerous independent scientific studies funded by the National Institutes of Health and other U.S. federal government agencies using the company’s reduced nicotine content cigarettes studies show that smokers who use 22nd Century’s reduced nicotine content cigarettes reduce their nicotine exposure and dependence, smoke fewer cigarettes per day, experience reduced withdrawal symptoms, increase their number of smoke-free days, and double their quit attempts.
The company believes that bringing its reduced nicotine content cigarettes to market will be an important step towards the implementation of the FDA’s proposed plan to require all cigarettes sold in the U.S. to be made “minimally or non-addictive.”
By limiting the nicotine content of all combustible cigarettes to just 0.5 milligrams of nicotine per gram of tobacco, a level already achieved in VLN, FDA projects that 5 million adult smokers would quit one year after implementation and more than 8 million American lives would be saved by the end of the century.
The Kanengo tobacco market in Lilongwe will open on April 20 despite the coronavirus lockdown that takes effect in Malawi on at midnight on Saturday, reports The Nyasa Times, citing the Tobacco Commission.
According to the commission’s corporate and business development manager, Hellings Nasolo, Health Minister Jappie Mhango exempted the tobacco market when he announced the lockdown.
“We will go ahead to open the tobacco market as scheduled. However, we have put in place strict measures to ensure that our farmers and buyers are not infected by the disease,” he said.
Most of the tobacco buying companies’ staff members are operating from home in view of the coronavirus.
The Tobacco Commission is yet to announce dates for the opening of the tobacco markets at Chinkhoma, Limbe and Mzuzu.
U.S. cigarette sales dropped significantly following initial stockpiling related to the Covid-19 pandemic.
According to Nielsen convenience store data, traditional cigarette volumes fell 8.4 percent for the week that ended April 4.
By comparison, traditional cigarettes sales volume rose 1.1 percent for the week that ended March 22, after states started ordering people to stay home.
Goldman Sachs analyst Bonnie Herzog wrote Tuesday that the sharp decline occurred “as consumers likely depleted their previous pantry-loading.”
Health advocates fear that consumption could rise as smokers spend more time at home during quarantine, away from public places with smoking bans.
“Consumption levels also tend to increase during times of personal stress. Lower gas prices and consumer wages—and/or unemployment benefits—are also key variables for 2020 volumes,” Piper Sandler analyst Michael Lavery was quoted as saying.
Meanwhile, value sales of mainstream vapor products decreased 10.7 percent for the four-week period, but remained up 22 percent over the year.
The decline in demand for closed-pod cartridges, was driven largely by recent federal regulatory changes.
A recent study published by the American Cancer Society (ACS) in the American Journal of Public Health revealed that Juul’s removal of its flavored vapor products from retail stores in October 2018 had “little to no long-term effect on overall sales, with users quickly switching to other flavors or different brands that were still selling the ‘sweet’ flavors.”
The products that Juul pulled from stores in 2018 were e-cigarettes flavored as mango, fruit medley, cucumber and creme brulee.
The study used retail sales data from Nielsen. “Data from this ACS study also show how dramatically the introduction of Juul affected patterns of youth e-cigarette use and led to the highest levels of youth tobacco use in nearly 20 years,” said Robin Koval, president and CEO of Truth Initiative.
“Until November 2017, tobacco was still the most preferred e-cigarette flavor. The introduction of flavored, high nicotine, highly addictive products produced a huge growth in youth usage and consumption of flavored products.”
After Juul discontinued selling its flavored products in retail stores, sales of menthol-flavored/mint-flavored products doubled, with the tobacco-flavored products also experiencing a significant spike in popularity.
“The current national e-cigarette flavor guidance, adopted in January 2020, includes a large and dangerous loophole that keeps menthol and other youth-appealing e-cigarette flavors on the market,” Koval added. “It clearly favors the very industry that has ensnared a new generation to become tobacco users, the highest number in nearly 20 years.”
The current social and economic lockdown due to the Covid-19 crisis in India will cause tobacco product consumption and exports to decline by 20 percent this year, according to the Tobacco Board. The board added that it may ask tobacco growers to reduce its production due to the drop in demand.
A member of India Tobacco Association (ITA) said, “Like any other industry, the tobacco industry also came to standstill due to lockdown. Tobacco auction in AP, which began earlier, was also suspended. It is expected to begin after April 20. Due to delay in supplies and also health advisories on Covid-19, there may be muted demand this year. Tobacco Board expects about 20 percent dip in demand this year.”
Last year, leaf production in Andhra Pradesh and Karnataka totaled 124 million kilograms and 103 million kilograms, respectively. About 65 percent of the total amount of tobacco leaf grown in India is exported.
The ITA spokesperson added, “The foreign buyers are yet to come to India and physically inspect the product and place orders, though initial discussions on requirement and quality parameters are over. They changed their travel plans as there is complete lockdown in most of the countries.”
Francois Balloux, an infectious disease expert at University College London, says there is “bizarrely strong” evidence for the suggestion, made by artist David Hockney and others, that smoking could protect people against the coronavirus.
According to an article in The Daily Mail, data from multiple Chinese studies shows that Covid-19 hospital patients contained a smaller proportion of smokers than the general population (6.5 percent compared to 26.6 percent), suggesting they were less likely to end up in the hospital.
Another study, by America’s Centers for Disease Control (CDC) of more 7,000 people who tested positive for the coronavirus, found that just 1.3 percent of them were smokers—against the 14 percent of all Americans that the CDC says smoke.
Critics, however, attribute the counterintuitive findings to improper recording.
“It’s really difficult to assess how well smoking status has been recorded in an emerging epidemic and a lot of these people have been too sick to answer or may not have replied totally honestly,” said Jamie Brown, a tobacco and public health expert at University College London.
“We know, generally, smokers tend to come from lower income groups, which have poorer access to healthcare and may be more likely to die in the community.”
Both Public Health England and the CDC have urged people to stop smoking to protect their health.
“It is abundantly clear from the research into previous coronaviruses that smoking makes the impact of a coronavirus worse,” British Health Secretary Matt Hancock said last month.
His chief medical adviser, Chris Whitty, added: “If you are going to give up smoking, this is a very good moment to do it.”
Living up to its reputation for recession resilience, the cigarette industry appears to offer a safe haven in the current uncertain business environment too.
