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RAI announces 44th consecutive quarterly dividend

| May 8, 2015

Reynolds American Inc. reported that shareholders had re-elected five directors at the company’s annual meeting yesterday; approved, on an advisory basis, the compensation of named executive officers; ratified the appointment of KPMG LLP as the independent registered public accounting firm for RAI’s 2015 fiscal year; and defeated two shareholder proposals.

In addition, RAI’s board of directors declared a quarterly cash dividend on the company’s common stock of $0.67 per share ($2.68 per share annualized). The dividend will be payable on July 1 to shareholders of record on June 10.

RAI said that this was the 44th consecutive quarterly cash dividend since RAI became a public company on July 30, 2004.

Quebec to hold consultation on tobacco act changes

| May 7, 2015

Imperial Tobacco Canada has come out in support of the ‘intention behind the amendments to the Quebec Tobacco Act’, but believes certain measures will not achieve the government’s public health objectives and, in some cases, will be counterproductive.

According to a CBC News story relayed by the TMA, the junior minister for public health, Lucie Charlebois, on Tuesday tabled Bill 44 that would ban electronic cigarette use in public places; outlaw the sale of these devices to minors; prohibit tobacco smoking inside vehicles carrying young people under the age of 16; expand the smoking ban in enclosed public places to bar and restaurant patios, and to common areas in buildings of two to five apartments; and ban flavored tobacco products. Also under the bill, retailers ‘repeatedly’ caught selling tobacco products to minors could be fined up to C$250,000 (US$ 208,000), while businesses that allowed customers to smoke on patios could face fines of up to C$100,000 (US$ 83,200).

A public consultation is due to be held on the proposals before members of the National Assembly vote on the bill.

“We applaud the Government of Quebec for making sure there is ample time for consultation on the amendments, and we look forward to being part of the process,” Caroline Ferland, vice-president of corporate and regulatory affairs at Imperial said in a statement issued through Canada Newswire. “We are hopeful that the government will be receptive during the consultation process and recognize the difference between fact-based evidence and emotional cries for change”

Imperial said that in its proposed amendments to the act, the government intended to ban the sale of menthol cigarettes; a ban that would serve only to fuel the illegal tobacco trade while not contributing to reaching any of the government’s health objectives. “Although we agree with many of the proposed measures, such as a ban of fruity-, candy- and confectionary-flavored tobacco products, there is no fact-based evidence to support a ban of menthol products,” said Ferland. “Prohibiting menthol will drive adult consumers to the illegal tobacco market where over 35 menthol brands are already available.”

Imperial has a problem, too, with the government’s intention to regulate electronic cigarettes as tobacco products. It said that such an approach failed to take account of the unique nature of these products, which did not contain tobacco.

“We recognize the potential health risks associated with smoking and support reasonable, evidence and fact-based regulation of tobacco products, especially those intended to keep tobacco out of the hands of youth,” said Ferland. “We fully support Minister Charlebois’ stated intention of the bill: to protect youth, and we look forward to being part of the discussion process.”

Dr. Richard Massé, director of public health at Montréal’s health and social services agency and the Coalition Québécoise pour le contrôle du tabac, also welcomed the bill, but he argued that the measures did not go far enough – did not require standardized tobacco packaging.

According to a story in the Montreal Gazette relayed by the TMA, Massé commended the government for following the ‘precautionary principle’ in banning electronic cigarette use in indoor public places.

Meanwhile, Suzanne Dubois, executive director of the Quebec division of the Canadian Cancer Society, commended Charlebois’ “courage in putting an end to the sad strategies of the tobacco industry”.

One Montreal bar and restaurant owner had other ideas, however. According to a story by The Canadian Press, Peter Sergakis, who owns 40 establishments in the Montreal area, predicted that business would drop by as much as 15 per cent if Quebec went ahead with the plan to ban smoking on outdoor patios.

Sergakis said the proposed rules would result in clients opting to stay home at a time when business was already slumping. “The consumer has no money and instead of going to bars and restaurants two or three times a year, they’re going once because everything is so expensive,” he said.

“With no smoking on patios there will be even less people coming.”

Russian cigarette market predicted to fall sharply

| May 7, 2015

The Russian cigarette market could decline by 8-12 percent to 289-277 billion this year, primarily driven by an increase in taxes and the weakening of the domestic economy, according to an ITAR-TASS story relayed by the TMA.

Sergey Kiselev, vice-president of corporate affairs and communications at JTI Russia, said that the decline in the domestic cigarette market, which began in 2013 when the overall market shrank by 5.4 percent, had accelerated sharply in recent years.

JTI expects legal cigarette sales to decline by 9-12 percent, while Philip Morris Sales and Marketing estimates that the market could fall by 8-10 percent.

No excise to be levied by Manitoba on e-cigarettes

| May 7, 2015

The provincial government of Manitoba, Canada, is not going to increase taxes on electronic cigarettes even though smokers switching to these products is said to comprise the major reason why a C$1-per-carton excise increase on regular cigarettes is predicted to result in a 12 percent drop in tobacco revenue, according to a story by The Canadian Press.

The government raised tobacco excise in last week’s budget.

Barry Draward, an assistant deputy minister of finance, said the main reason for the drop was people switching from tobacco to electronic cigarettes, which attracted only eight percent provincial sales tax.

Draward said the jury was still out as to whether electronic cigarettes were an alternative form of tobacco cigarettes or stop-smoking aids, and that there could be tax implications.

“It would be a health [department] decision, regardless,” Draward said. “If they’re saying it’s a cigarette replacement, then, in my opinion, we’ve got to tax it, but we don’t know that yet.”

However, Jodee Mason, a spokeswoman for Finance Minister Greg Dewar, said the province was not going to raise taxes on electronic cigarettes.

Imperial shuns concept of heat-not-burn products

| May 7, 2015

Imperial Tobacco is taking a different path to its multinational competitors as the industry searches for the vaping technology with the potential to replace tobacco smoking, according to a story by Martinne Geller.

Imperial is said to have no taste for the heat-not-burn tobacco products that others are embracing along with electronic cigarettes.

“It’s not something we’re interested in,” Matthew Phillips, Imperial’s corporate affairs director, was reported to have told journalists on Wednesday, when his company announced its first half results.

Philip Morris International, British American Tobacco and Japan Tobacco International, have or are due to include heat-not-burn products in their portfolios.

Because they are made from tobacco, Phillips predicts that these products will be viewed and taxed in the same way that cigarettes are.

And marketing them as offering a reduced risk benefit would be “a very, very big ask,” he said.

“There’s no difference really between those products and traditional tobacco products,” Phillips said. “It’s probably better described generically as ‘heat and burn’ rather than ‘heat not burn’.”

Imperial’s tobacco volume down in first half

| May 6, 2015

Imperial Tobacco’s total tobacco volume during the six months to the end of March, at 138.2 billion stick equivalents, was down by one percent on that of the six months to the end of March 2014. On an ‘underlying basis, volume was down by 5 percent.

Stick equivalent volume is said to include cigarette, fine-cut tobacco, cigar and snus volumes. Underlying volume change removes the impact of the company’s stock optimization program.

Meanwhile, Imperial’s ‘Growth Markets’ volume was down by three percent (11 percent underlying), from 49 billion to 48 billion, while Growth Markets market share was down from 5.6 percent to 5.5 percent. And its ‘Returns Markets’ volume was down by 1 percent (1 percent underlying), from 91 billion to 90 billion.

Growth Brand volume was increased by 17 percent (12 percent underlying), from 60.2 billion to 70.5 billion.

‘Our Growth Brands continue to outperform the market, with underlying volumes up 12 percent and underlying net revenues up 15 percent,’ Imperial said in announcing its results. ‘There were particularly strong performances from Davidoff, JPS, West and Parker & Simpson which supported the improved market share of Growth Brands, up 90 basis points to 6.1 per cent, with share up in 12 of our top 15 markets…’

Imperial said that performance highlights had included excellent results from Skruf snus in Scandinavia and growth in premium cigar volumes in the US, Spain, China and Brazil. ‘We also continued to capitalise on our world leadership in fine-cut tobacco, including in the UK where we further strengthened the Golden Virginia brand franchise with gains from the gv variant,’ it said.

Fontem was said to have continued to build its portfolio presence in Europe, widening the availability of the Puritane electronic cigarette brand in the UK through partnerships with additional retailers and launching the e-vapour brand JAI in France and Italy.

‘Other product launches are being evaluated in a number of non-tobacco lifestyle consumer categories and Fontem is also continuing to develop and license a range of patented technologies,’ the company said.

Imperial’s tobacco net revenue during the six months to the end of March, at £2,945 million, was down by four percent on that of the six months to the end of March 2014, £3,054 million.

Tobacco adjusted operating profit increased by two percent to £1,295 million, while logistics adjusted operating profit was unchanged at £73 million, and total adjusted operating profit increased by two percent to £1,367 million.

Adjusted earnings per share increased by four percent to 93.3p, while the interim dividend per share was up by 10 percent to 42.8p.

“This has been a good start to the year, said chief executive, Alison Cooper.

“The progress we’re making with our strategic agenda is improving the consistency and quality of our performance, with our Growth Brands delivering 12 per cent underlying volume growth and further gains from our Specialist Brands.

“We continued to build momentum in our Growth Markets and generated positive results from Returns Markets.

“Cash conversion was up, our debt reduced significantly and we delivered another dividend increase of 10 per cent.

“We are building on these successes in the second half and look forward to completing the US deal and realising the benefits of our enhanced brand equity and scale in this important market.”

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