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Malaysia’s FCTC steering committee hikes prices

| July 31, 2015

Malaysia’s steering committee of the World Health Organization’s Framework Convention on Tobacco Control (FCTC) has decided that cigarette prices should be raised twice in a year, according to a story in The Star.

Health Minister Datuk Seri Dr S. Subramaniam said the decision had been agreed to by the steering committee on Thursday.

Under the decision, the minimum retail price of cigarettes would be increased from RM7 to RM9 from August 1.

And it would be increased again, to RM10, after a year.

“This is in line with the FCTC pledge that we signed in 2003,” Subramaniam told a press conference.

The committee agreed also to designate all public parks and public areas in national parks as no-tobacco-smoking zones. The areas include campsites, canopy walks and observation towers.

And it agreed to declare air-conditioned eateries as non-tobacco-smoking areas.

Subramaniam said that for the time being the authorities would concentrate on educating the public about the no-tobacco-smoking bans, but that they hoped fully to enforce the bans from the start of next year.

Zimbabwe’s export prices up but grower prices down

| July 31, 2015

So far this year, Zimbabwe has earned US$322 million from exporting 59.0 million kg of tobacco at an average price of US$5.46 per kg, according to a story in the Bulawayo Chronicle citing Tobacco Industry and Marketing Board (TIMB) figures.

During the same period of last year, the country earned US$211 million from exporting 45.8 million kg at an average price of US$4.61 per kg.

This year China has been Zimbabwe’s biggest customer, so far paying US$176.8 million for 20.8 million kg, representing an average price of US$8.48 per kg.

Last year, Zimbabwe earned close to US$1 billion from tobacco exports.

Meanwhile, the Chronicle reported that the 2015 marketing season had closed with growers having been paid an average of US$2.94 per kg for 191.9 million kg.

In 2014, growers sold 209.1 million kg for an average price of US$3.17 per kg.

So, during the same period – though not involving the same tobacco – export prices rose by 18.4 percent as grower prices fell by 7.2 percent.

Auctions blocked as Malawi rejections hit 60 percent

| July 31, 2015

A ‘fracas’ occurred at the auction floors at Lilongwe, Malawi, on Tuesday, apparently over the prices being offered for growers’ tobacco.

A Malawi24 report said the auctions had been blocked by growers concerned about the rejection rate, which reportedly reached 60 percent.

Usually, a ‘rejection’ occurs when a grower refuses to accept the final price bid for his tobacco.

The CEO of Malawi’s Tobacco Control Commission (TCC), Bruce Munthali, said that growers and the commission were in talks over the matter.

Munthali was said to have argued that a high rejection rate was not something new, but to have added that tolerable rejection rates ranged up to 20 percent.

The TCC expects that the entire crop will be sold by the end of the marketing season in mid-August.

ITC hits out at tax system in announcing 1Q results

| July 31, 2015

In announcing its first-quarter results to the end of June, ITC said that the performance of its cigarette business had reflected the ‘extremely challenging operating environment for the legal cigarette industry in India, which is facing unprecedented pressure on sales volumes’.

Despite ITC being a diversified company, cigarettes account for 40 percent of its revenues and 85 percent of its profit, according to a Moneycontrol.com story relayed by the TMA.

‘The punitive taxation regime on legal cigarettes in India was exacerbated with two rounds of sharp increase in excise duty – in July 2014 and February 2015,’ said ITC. ‘This includes a cumulative increase of 115 percent on filter cigarettes of “length not exceeding 65 mm”, which has widened the price differential between legal and illegal cigarettes and made it extremely difficult for the legal cigarette industry to counter the unabated growth of illegal cigarettes in the country.

‘Over the last three years, the incidence of excise duty and VAT on cigarettes, at a per unit level, has gone up cumulatively by 98 percent and 104 percent respectively. The combined impact of such sharp increases in excise duty and VAT is exerting severe pressure on legal industry sales volumes.

‘High incidence of taxation and a discriminatory regulatory regime on cigarettes in India have, over the years, led to a significant shift in tobacco consumption to lightly taxed or tax-evaded tobacco products like bidi, khaini, chewing tobacco, gutkha and illegal cigarettes which presently constitute over 88 percent of total tobacco consumption in the country. Thus, the share of legal cigarettes in overall tobacco consumption has progressively declined from 21 percent in 1981-82 to below 12 percent in 2014-15 even as overall tobacco consumption has increased in India. Besides adversely impacting the performance of the legal cigarette industry, this has led to sub-optimisation of the revenue potential from the tobacco sector.

‘According to a recent independent study, it is estimated that products representing 68 percent of overall tobacco consumption in the country escape taxation as they are manufactured in the unorganised sector with little statutory oversight. As a result, revenue collections from the tobacco sector are sub-optimised even as the overall tobacco control and health objectives remain substantially unfulfilled.’

ITC said there was a requirement for an India-centric tax and policy framework for tobacco that took account of the unique tobacco consumption pattern in the country.
But at the moment, it said, the imposition of discriminatory and punitive VAT rates by some states provided an attractive tax arbitrage opportunity for illegal cigarette trade by criminal elements.

‘The consequential decline in legal cigarette volumes in such states has led to stagnation/decline in revenue collections, even as illegal cigarettes gained significant traction,’ ITC said. ‘On the other hand, the pragmatic decisions of several state governments to rationalise VAT on cigarettes have facilitated improvement in revenue buoyancy and arresting the growth of illegal trade.

‘According to an independent study conducted by Euromonitor International – a renowned global research organisation – India is now the fifth largest market for illegal cigarettes in the world. In fact, illegal trade comprising smuggled foreign and domestically manufactured tax-evaded cigarettes is estimated to constitute one-fifth of the overall cigarette industry in India resulting in a huge revenue loss of over Rs.7000 crores (Rs70 billion) per annum to the national exchequer.

‘There is an urgent need for stability in tax rates on cigarettes to reverse the undesirable consequences of a punitive and discriminatory tobacco taxation policy. The company continues to engage with the concerned authorities, both at the central government and state level, highlighting the need for moderation in tax rates on cigarettes to maximise the revenue potential from the tobacco sector and contain the growth of the illegal segment.’

ITC’s net profit for the quarter, at Rs22.65 billion (US$353.0 million), was up by 3.6 percent from that of the first quarter to the end of June 2014, Rs21.86 billion (US$340.7 million), on revenues of Rs85.06 billion (US$1.3 billion), down 7.2 percent from Rs91.64 billion (US$1.43 billion), according to a Financial Express story relayed by the TMA.

The company’s cigarette-business net sales, at Rs27.81 billion (US$433.5 million) were up from Rs27.22 billion (US$424.3 million) a year earlier.

Altria’s cigarette, cigar and smokeless volumes up

| July 30, 2015

Philip Morris USA’s domestic cigarette shipment volume during the three months to the end of June, at 33,124 million, was up by 3.1 percent on that of the three months to the end of June 2014, 32,134 million.

Marlboro shipments increased by 3.0 percent to 28,498 million; shipments of other premium brands fell by 3.4 percent to 1,767 million; while shipments of discount brands increased by 8.9 percent to 2,859 million.

PM USA’s share of the domestic retail cigarette market during the three months to the end of June, at 51.4 percent, was increased by 0.5 of a percentage point on that of the three months to the end of June 2014. Marlboro’s share, at 44.2 percent, was up by 0.3 of a percentage point; the share of its other premium brands was down by 0.1 of a percentage point to 2.8 percent; while the share of the company’s discount brands was increased by 0.3 of a percentage point to 4.4 per cent.

The Altria Group yesterday published its second-quarter and first-half results for 2015.

Middleton’s cigar shipment volume during the three months to the end of June, at 334 million, was increased by 0.9 percent on that of the three months to the end of June 2014, 331 million.

Black & Mild brand shipments were up by 1.6 percent to 325 million, while shipments of other cigar brands fell by 18.2 percent from 11 million to nine million.

Middleton’s share of the domestic retail cigar market during the three months to the end of June, at 27.9 percent, was down by 0.8 of a percentage point from that of the three months to the end of June 2014. Black & Mild’s share was down by 0.7 of a percentage point to 27.6 percent, while the share of the company’s other brands was down by 0.1 of a percentage point to 0.3 per cent.

USSTC and PM USA’s combined, domestic smokeless-products shipment-volume during the three months to the end of June, at 209.0 million cans and packs, was up by 2.6 percent on that of the three months to the end of June 2014, 203.8 million.

Shipments of Copenhagen were up by 5.4 percent to 121.2 million; those of Skoal were up by 0.1 percent to 69.4 million; while those of other brands were down by 5.6 percent to 18.4 million.

USSTC and PM USA’s share of the US domestic market for smokeless products during the three months to the end of June, at 54.8 percent, was down by 0.1 of a percentage point on that of the three months to the end of June 2014. Copenhagen’s share was up by 0.8 of a percentage point to 31.3 percent; Skoal’s share was down by 0.7 of a percentage point to 19.8 percent; while the share of other brands was down by 0.2 of a percentage point to 3.7 percent.

Meanwhile, PM USA’s cigarette shipment volume during the six months to the end of June, at 62,322 million, was increased by 2.4 percent on that of the six months to the end of June 2014, 60,883 million.

Marlboro shipments rose by 2.1 percent to 53,615 million; shipments of other premium brands fell by 3.3 percent to 3,345 million; while shipments of discount brands increased by 8.8 percent to 5,362 million.

Middleton’s cigar shipment volume during the six months to the end of June, at 636 million, was increased by 5.1 percent on that of the six months to the end of June 2014, 605 million.

Black & Mild brand shipments were up by 5.6 percent to 623 million; while shipments of other brands fell by 13.3 percent to 13 million.

USSTC and PM USA’s combined, domestic, smokeless-products shipment-volume during the six months to the end of June, at 400.1 million, was increased by 2.6 per cent on that of the six months to the end of June 2014, 389.9 million.

Copenhagen shipments were up by 5.7 percent to 231.3 million; Skoal shipments were up by 0.1 percent to 133.4 million; while shipments of other brands were down by 6.1 percent to 35.4 million.

Altria’s second-quarter reported diluted earnings per share (EPS) increased by 15.6 percent to $0.74, and its second-quarter adjusted diluted EPS, which excludes the impact of special items, increased by 13.8 percent to $0.74.

Altria’s first-half reported diluted EPS decreased by 1.6 percent to $1.25, but its first-half adjusted diluted EPS increased by 13.1 percent to $1.38.

“Altria delivered excellent second-quarter and first-half results, growing adjusted diluted EPS more than 13 percent with a very strong performance from the smokeable products segment and solid contributions across our other businesses,” said Marty Barrington, Altria’s chairman, CEO and president.

“Further, our tobacco companies’ brands continued to strengthen their market leadership, with record retail share on Marlboro and more than 51 percent combined share on Copenhagen and Skoal year-to-date.

“Based on this very strong first-half performance and our outlook for the second half, we are raising our full-year adjusted EPS guidance.”

Tough tobacco control law passed in Uganda

| July 30, 2015

Ugandan lawmakers on Tuesday passed a law banning smoking within 100 meters of public buildings, banning the sale and use of shisha tobacco and banning all forms of tobacco, advertising, promotion and sponsorship, according to a story by Deo Walusimbi for the Observer, relayed by the TMA.

Control Bill 2014, which now goes for signature to President Yoweri Kaguta Museveni, requires graphic health warnings to be included on 75 percent of the surface of cigarette packs and requires packs to be sold with a minimum of 20 pieces.

The bill provides for violations to be punished with fines and/or jail terms.

It authorizes police officers to make arrests without obtaining search warrants, but they cannot destroy confiscated tobacco products, as was allowed for in the original bill.

The bill calls for establishment of a tobacco control committee.

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