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Hungary asked to alter tax-change rules

| April 23, 2014

The European Commission has warned that it might refer to the European Court of Justice Hungarian legislation that runs counter to an EU directive regulating tobacco trade.

In Hungary, tax rates are included on tobacco products packaging, and when taxes change, packs with the old tax rates cannot be sold after 15 days of the new tax rate coming into force.

The commission says, however, that excise duties are harmonized under an EU directive that does not allow the restriction of the trade in tobacco products once they are released for consumption.

The commission has asked Hungary to change its legislation, a request that takes the form of a “reasoned opinion”: the second stage of an infringement procedure.

PMI’s volume down in first quarter

| April 22, 2014

Philip Morris International’s cigarette shipment volume during the first quarter of 2014, at 195.961 billion, was down by 4.4 percent on that of the first quarter of last year, 204.947 billion, though, excluding the unfavorable impact of estimated inventory movements in the quarter, the company reported, its volume decreased by about 2 percent.

Volume was down in all of PMI’s regions. It was down by 2.5 percent in its Asia region to 70.801 billion, mainly reflecting a lower market share in Indonesia, a lower market share and the adverse timing of PMI shipments in Japan, partially offset by total market growth driven by retail trade and consumer purchasing in anticipation of the April 1 consumption tax increase, and lower share in Pakistan, partially offset by the results in the Philippines being driven by a favorable comparison with those of the first quarter of 2013.

Volume was off by 2.9 percent in the EU to 41.705 billion, mainly reflecting lower total markets, partially offset by market share growth.

It was down by 4.8 percent in Latin America and Canada to 21.449 billion, due largely to the unfavorable impact of price increases in Mexico.

And it was down by 7.2 percent in Eastern Europe, Middle East and Africa (EEMA) to 62.006 billion, due mainly to a lower total market in Russia and unfavorable estimated inventory movements across various markets within the region, partially offset by Turkey.

Marlboro shipments of 65.9 billion were down by 4.1 percent, due primarily to unfavorable estimated inventory movements in the EEMA region and Japan, lower share in Japan, and a lower total market in the EU and Mexico, partially offset by the company’s performance in the Philippines.

L&M shipments of 21 billion were down by 5.8 percent; Parliament shipments of 9.9 billion were up by 1.2 percent; Bond Street shipments of 9.3 billion were decreased by 6.3 percent; Chesterfield shipments of 8.8 billion were increased by 14.3 percent; Philip Morris shipments of 8 billion were down by 5.4 percent; and Lark shipments of 6.8 billion were down by 0.3 percent.

PMI’s shipment volume of other tobacco products (OTP), in cigarette equivalent units, was down by 1.1 percent, mainly due to declines in the pipe tobacco and snuff categories in Southern Africa that offset slight growth in the fine-cut category.

The total volume of cigarettes and OTP was down by 4.3 percent.

PMI’s market share was said to have increased in a number of key markets, including Algeria, Australia, Belgium, Brazil, Canada, France, Germany, Greece, Korea, Poland, Russia, Saudi Arabia, Spain, Thailand, the U.K. and Vietnam.

PMI said that its reported diluted earnings per share, at $1.18, were down by $0.10 or 7.8 percent on those of the first quarter of 2013, or, excluding the effects of currency factors, were up by $0.06 or 4.7 percent on those of the first quarter of 2013, $1.28.

Adjusted diluted earnings per share, at $1.19, were down by $0.10 or 7.8 percent from $1.29, though excluding currency factors, adjusted diluted earnings were up by $0.06 per share, or 4.7 percent.

Reported net revenues, excluding excise taxes, were down by 8.8 percent to $6.9 billion, or by 1.6 percent, excluding currency factors.

Reported operating companies’ income was down by 12.9 percent to $3.0 billion, or by 3.7 percent excluding currency factors.

Adjusted operating companies’ income was down by 12.3 percent to $3.0 billion, or by 3.1 percent excluding currency factors.

Reported operating income was down by 13 percent to $3 billion.

“Our first-quarter results were in line with our expectations, given the known challenges we face in Asia and inventory distortions,” said André Calantzopoulos, CEO.

“While currencies remain volatile, we have recently witnessed an improvement in their unfavorable impact on our business, and accordingly, together with the restructuring charge [Australia], we are increasing our 2014 full-year reported diluted earnings per share guidance by $0.07.

“Based on our expectation of robust pricing, market share growth momentum and early signs that the operating environment is improving in Europe, combined with our continued investments for the long term, we remain confident in our constant-currency adjusted diluted EPS growth rate of [6–8 percent] for this year.”

Bergerac R&D in cost-cutting sights

| April 22, 2014

As part of its cost-cutting plans, Imperial Tobacco intends to “offload” its research center in Bergerac, France, according to a story in Le Figaro.

Imperial said last week that it was proposing to close its cigarette factories at Nottingham, U.K., and Nantes, France, as part of a cost optimization program aimed at delivering savings of £300 million a year from September 2018.

It said the projects, which are planned to be “implemented progressively” during the next two years, were aimed at strengthening its competitive position.

The “European restructuring projects” could see 900 jobs axed.

Pleasures for poor people—what next?

| April 22, 2014

MPs in Uganda have queried why tobacco farmers look poor while tobacco companies look rich, according to a story by John Odyek for The New Vision.

The MPs were apparently attending a meeting at the Sheraton Kampala Hotel to discuss the Tobacco Control Bill 2014.

“People who have planted tobacco live in grass-thatched houses,” said David Muhumuza (Mwenge North). “Are our farmers getting anything?”

Compared to other farmers, tobacco farmers are relatively well off. The Uganda National Household Income Survey 2012–2013 showed that average monthly household incomes for rural areas stood at UGX325,000, while tobacco farmers earned more than UGX426,624 per month.

Some of the MPs were said to have asked tobacco companies to ensure that growers who receive cash payments don’t misuse them for “pleasures.”

The story didn’t mention whether the consumption of tobacco products might be regarded as such a misuse.

Jonathan D’Souza, the managing director of British American Tobacco Uganda, was quoted as saying his company had helped more than 20,000 tobacco farmers open bank accounts in Post Bank at a cost of UGX1.2 billion.

There were 60,000 tobacco farmers in more than 25 districts and tobacco was one of the leading foreign exchange earners for Uganda.

BAT Uganda supported food security for farmers through the issuance of free hybrid maize seed in its annual Food After Tobacco program, and engaged in afforestation programs to ensure that tobacco growing and curing activities had a minimal impact on the environment, added D’Souza.

Shipping cigarette butts to useful ends

| April 22, 2014

Australia Imps pic2Imperial Tobacco Australia is helping to fund a pioneering scheme to recycle cigarette butts.

The business is partnering with recycling firm Terracycle to encourage people over the age of 18 to sign up to its Cigarette Waste Brigade.

Other tobacco companies are also providing financial support for the scheme.

Those taking part can send cigarette waste to Terracycle, at no cost, to have it recycled into products such as shipping pallets, railway sleepers and ashtrays.

For every kilogram of waste received, Terracycle will donate $2 to the sender’s nominated charity.

“The best approach to tackling cigarette litter is for key stakeholders, including the tobacco industry, to work together to educate and change people’s behaviour,” said Imperial’s communications manager in Australia, Michelle Park.

“Terracycle has developed a truly innovative solution for cigarette waste, one that enables consumers to take greater responsibility for butt litter, and we’re proud to be involved.”

New Universal business includes sweetener for tobacco growers

| April 17, 2014

Universal Corp. said yesterday that it had entered the fruit and vegetable food ingredients market through its new subsidiary, Carolina Innovative Food Ingredients (CIFI).

“The new business will utilize advanced technology to produce high-quality, food-grade dehydrated and juiced fruit and vegetable products,” Universal said in a note posted on its website. “Initially the business will focus upon value-added ingredients derived from sweet potatoes.”

CIFI expects to invest about $20 million over two years in a new juice and dehydration facility that will be located in Nash County, North Carolina, USA, and managed by the company’s North American regional management team.

The business is expected to begin production during the first quarter of 2015 and to employ about 64 people.

“Universal continues to seek out growth opportunities that enhance our company’s value and help to sustain tobacco growers,” said George C. Freeman III, chairman, president and CEO.

“With this new business, we will be able to offer high-quality food ingredients to the food and pet food manufacturing industries while providing tobacco growers with a new market for sweet potatoes. Nearly half of U.S. sweet potato production comes from North Carolina, and they are often grown in rotation with tobacco.”

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