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Alliance pays lower tobacco prices but seeks to improve social responsibility

| November 5, 2014

The prices paid for farmers’ tobacco by Alliance One International during the second quarter of this financial year were generally below those of ‘last season’.

In announcing the company’s second quarter results to the end of September, CEO Pieter Sikkel said that the challenging conditions identified at the end of fiscal year 2014 had continued during the first half of this year. “These included adverse weather in some regions during growing and harvesting that delayed purchasing tobacco from suppliers and building global oversupply,” he said. “Market prices paid for tobacco from suppliers remains generally below last season resulting in a reduction in cost per kilo this quarter of approximately 2.1 percent to $4.60 per kilo.

“As anticipated, the slow start to buying reduced first quarter sales versus last year and has had the same impact through the second quarter. For the second quarter, kilos sold reduced 16.7 percent to 107.1 million and revenues declined 15.8 percent to $589.8 million versus last year, which are in line with internal expectations. Our internal forecast for the full year estimates similar revenue and improved core income before taxes and other items.”

For the quarter, it was stated that income before taxes and other items improved $45.6 million to $8.4 million and included a $5.5 million reserve for customer receivables and lower cost or market adjustments on inventory. Last year’s results had included $55.6 million of debt retirement expense mainly related to Alliance’s refinancing.

“Tobacco markets, globally, are in oversupply and we are well positioned with a controlled quarter end inventory level of $976.4 million, down $8.4 million compared to last year,” Sikkel said. “Our net debt this year also decreased $130.6 million to approximately $1,230.7 million and we plan to work on further year-over-year reductions as we move forward.”

Sikkel said Alliance would continue to invest carefully where appropriate returns were achievable, incorporating further improvements to sustainability and social responsibility initiatives. “Many key customers value these global initiatives and are beginning to monitor how we measure our success and areas for improvement,” he said.

“Developed sustainability and social responsibility programs are becoming requirements to be a leaf supplier for many manufacturers. As such, controlled investment in these core areas with focus on our customers’ longer term requirements should improve our results and increase shareholder value.”

Don’t get sniffy about these detectors – although more research is needed

| November 5, 2014

Portable devices are expected to be used in the Netherlands to take from cafés air samples that will later be analyzed to help inspectors determine whether the national tobacco smoking ban has been broken, according to a story by Janene Van Jaarsveldt for nltimes.nl.

The strategy, which is based on research by the National Institute for Public Health and the Environment (RIVM), is aimed at reducing the number of ban violations that, it is estimated, occur in as many as a third of the country’s cafés.

The samplers, which would be operated by representatives of the Food and Consumer Product Safety Authority (NVWA), take air samples that can be analyzed in laboratories.

The RIVM is recommending that further research be carried out to determine how the sampling method might best be applied in practice.

Forest celebrates 35 years of standing up for smokers, widens freedom horizons

| November 4, 2014

The UK smokers’ group Forest is today marking its 35th anniversary with a special smoker-friendly party in London.

Two hundred guests are expected to attend the event, Forest@35, including several members of parliament.

The event, at Boisdale of Belgravia, will be attended by long-standing supporters, among them Trevor Baylis OBE, inventor of the clockwork radio, and musician and singer-songwriter Joe Jackson (‘It’s Different For Girls’, ‘Is She Really Going Out With Him?’).

“We’re delighted to reach this milestone,” said Forest’s director, Simon Clark.

“The war on tobacco has been going on for a long time now. We accept that society has changed and smokers are now in a minority but that doesn’t mean they shouldn’t have any rights or representation.

“The recent call for a ban on smoking in parks and squares was a step too far. Tobacco is a legal product and adults must be allowed to smoke somewhere without finger-wagging or worse.

“If politicians and campaigners don’t want adults smoking in front of children they should review the smoking ban and give proprietors the option of installing well-ventilated smoking rooms in pubs and bars.

“The freedom to smoke is not a human right but the state shouldn’t force people to quit.

“Unfortunately recent legislation, including the smoking ban and plain packaging, is designed to denormalise and stigmatise the consumer in the hope they’ll give up.”

The evening will feature also the launch of a new campaign, Action on Consumer Choice, which will cover food, drink and smokeless tobacco including e-cigarettes.

“Since Forest was founded in 1979 Britain has changed from a benign nanny state to a censorious bully state that demands people change their lifestyle, whether it be eating, drinking or smoking,” Clark said.

“The attempt to over-regulate e-cigarettes suggests the battle is not about health, it’s about control.

“Forest’s role is to defend freedom of choice and promote personal responsibility. We’ll continue to do that in the knowledge there are millions of people who share and support our views.”

 

Zimbabwe urged to add value to exports

| November 4, 2014

Zimbabwe last year lost about US$6 billion through exporting unprocessed tobacco rather than finished tobacco products, according to a New Zimbabwe story quoting policy analyst Butler Tambo.

Tambo, who was addressing an ‘Ideas Festival’ organized by the lobby group, Bulawayo Agenda, said Zimbabwe’s young people should be mentored in a way that encouraged them to venture into value addition and import substitution, on which the Zimbabwe Agenda for Sustainable Socio-Economic Transformation blueprint could be anchored.

For instance, while unprocessed tobacco sold for an average of $3.66 per kg at the auction floors, threshed tobacco was priced at about $7.30 per kg and cigarettes were priced at about $30.50 per kg, he said.

In monetary terms, he added, the 166 million kg of unprocessed tobacco exported last year had earned $608 million, but Zimbabwe could have earned as much as $6.08 billion from finished cigarettes.

Imperial tobacco volume down 23 billion

| November 4, 2014

Imperial Tobacco’s volume shipments of cigarettes and other tobacco products calculated as ‘stick equivalents’ (SE) during the 12 months to the end of September, at 294 billion, were down by seven percent on those of the 12 months to the end of September 2013, 317 billion.

The company said that the underlying fall in shipments, which excludes the impact of a stock optimization program that reduced trade inventories in a number of markets, was four percent.

And it said that underlying shipments of its Growth Brands were up by seven percent, driven by organic growth and brand migrations.

In its preliminary results, issued today, Imperial said that it had made significant progress in the year to the end of September, implementing a stock optimization program, managing its cost base and controlling its cash flows.

The stock program, which was now completed, had reduced trade inventories in some of the company’s major markets, affecting volumes by about nine billion SE.

Results had been affected also by market size declines.

But strong price/mix and cost control initiatives had mitigated some of these impacts.

‘Underlying revenue and volume results remove the impact of the stock program and give a clearer picture of how well we performed,’ the company said.

‘Total adjusted operating profit was stable at £3 billion. Underlying tobacco net revenue was up by two per cent.

‘The proportion of net revenue from our Growth Brands increased, improving the quality of our revenue and strengthening our sustainability.’

Meanwhile, Imperial reported that in Sweden and Norway it had enjoyed an ‘excellent performance’ from its Skruf brand that was behind ‘another set of strong results’ from its snus business, with share, volume, revenue and profit all increasing.

And it reported that, during the 12 months under review, it had entered the Egyptian market where it was concentrating on establishing its presence with Davidoff and Gauloises Blondes.

In July it had agreed to invest $7.1 billion (£4.2 billion) to acquire from US-based Reynolds American a number of assets that were being sold as a result of the acquisition of Lorillard by Reynolds.

The assets included a portfolio of US cigarette brands and blu, the number one electronic cigarette brand in the US.

The cigarette brands were being acquired without historic product liabilities.

Meanwhile, Imperial’s stand-alone, non-tobacco subsidiary, Fontem Ventures, had launched the Puritane electronic cigarette brand in the UK in February.

Fontem was focused also on expanding its presence across Europe with a ‘second e-vapour product’, though earlier expansion plans had been revised after Imperial had agreed to buy blu, which was sold in the UK.

Fontem continued to assess other potential product launches, in a variety of non-tobacco lifestyle consumer categories, while further developing and licensing its patented technologies.

“This has been a year of significant delivery by Imperial,” said chief executive, Alison Cooper.

“We’ve strengthened our brands and market footprint, improved cash conversion to 91 percent, reduced debt by £1 billion and delivered another 10 percent dividend increase to shareholders.

“We’ve completed our stock optimization program and realized over £60 million of further savings through our cost optimization program.

“We’ve achieved what we set out to achieve, creating a stronger business in the process.

“Trading conditions remain tough in many territories but the actions we’ve taken to enhance the quality and sustainability of the business have put us in a stronger position to drive growth and create sustainable value for our shareholders.”

Flavor intensity and pack elements link new products from different brands

| November 4, 2014

Flavor and aroma are the keys to two new products due to be launched by Japan Tobacco Inc next month.

The company said in a note posted on its website today that Cabin Gold Wild 8 Box and Caster Gold Silk 6 Box would bring out the best flavor and aroma characteristics of the Cabin and Caster brands through the use of special tobacco cutting methods and refined blends.

The new products are aimed both at Cabin and Caster smokers, and smokers new to these brands.

JT said that the Cabin brand was already renowned for its crisp roasted flavor and rich aroma, which was achieved by the ‘lavish inclusion’ of Burley tobacco in the blend and a heating process that roasted the flavor into the tobacco. Now, JT said, the production of Cabin Gold Wild 8 Box was employing a method in which the tobacco leaves were cut more coarsely than was usual and were processed at high temperature.

This, and the refinements to the blend, brought out the best of the Cabin flavor and aroma, offering consumers a roasted flavor they had never experienced before.

Meanwhile, the Caster brand was already known for its use of a subtly sweet aromatic flavoring that produced a smooth and sophisticated, mellow smoking experience. Now, the production of Caster Gold Silk 6 Box employed a method in which the tobacco leaves were cut more finely than was usual. This, and the refinements to the blend, brought out the best of the Caster flavor and aroma, providing consumers with a ‘prominent smooth taste’.

The two products, though from different brand families, are sharing pack design features.

JT said that the link between the two products, the way in which they each embodied a relentless pursuit of ideal qualities, was being symbolized by a common design motif inspired by a cross. And each brand name was being presented in a gold color to give the products a more luxurious, sophisticated look.

However, the main color of the Cabin pack is red, which is seen as expressing its rich, full-bodied, and roasted qualities, while white is used to reflect the smooth and mellow properties of Caster.

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