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Production declines point to more balanced market

| February 4, 2015

The current outlook for 2015 tobacco crops indicates decreased production volumes in the key growing areas, which is an important step towards more balanced markets, according to George C. Freeman, III, chairman, president, and CEO of Universal Corporation.

Freeman was speaking yesterday as he presented the company’s third-quarter results.

“The current fiscal year continues to develop as we expected, with shipments heavily weighted towards the second half of the year,” he said. “Third quarter lamina volumes shipped by our flue-cured and Burley operations were the highest that we’ve seen for several years. In addition, our third quarter operating earnings benefitted from lower selling, general, and administrative costs, as well as improved gross margins. Our prudent inventory management has kept uncommitted levels in the normal range, at 14 percent. The robust third quarter sales volumes and operating profit improvements offset a portion of the large declines we reported in the first half of the year from the later start to the markets and delayed receipt of shipping instructions from customers caused by the oversupply conditions this year.

“Although it is early and logistics delays can always occur, the fourth fiscal quarter’s processing and shipping schedules are proceeding as anticipated, with the largest portion of shipping volumes coming from the Africa origins. We continue to expect stronger fourth quarter sales volumes compared to the same quarter last year. The current outlook for the 2015 crops, which will impact our fiscal year 2016 results, indicates decreased production volumes in the key growing areas, which is an important step towards more balanced markets.”

Universal reported that net income for the third quarter of fiscal year 2015, which ended December 31, was $53.0 million, or $1.87 per diluted share, compared with net income for the previous year’s third fiscal quarter of $38.6 million, or $1.36 per diluted share.

Segment operating income for the third fiscal quarter of $93.5 million increased by 25 percent on that of the previous year, primarily due to improved results from higher gross margins and lower selling, general, and administrative costs.

Consolidated revenues decreased by about 1 percent to $758.1 million mainly attributable to lower prices and flat total volumes.

June deadline for Kenya’s graphic pack warnings

| February 4, 2015

Graphic health warnings are due to become a requirement on cigarette packs sold in Kenya from June, according to a story by Margaret Wahito for Capital FM Kenya.

The full-color graphics are to appear on the front and back panels accompanied by black and white text warnings that will be in English on the front and in Kiswahili on the back.

The new requirements are included in the Tobacco Control Regulations Act 2014, which bans the manufacture, sale, import and distribution of devices designed to cover or detract from the health warnings.

Under the act, the ministry of agriculture is required to promote among tobacco farmers viable alternative crops.

Complaint filed over use of tobacco-goods surcharge

| February 4, 2015

A smokers’ rights group yesterday filed a complaint with Taiwan’s Control Yuan, urging the watchdog organization to look into recent allegations that the Health Promotion Administration (HPA) had misused the health and welfare surcharge on tobacco products, according to a story in the Taipei Times.(Wikipedia describes the Control Yuan as being one of five branches of Taiwan’s government; specifically an investigatory agency that monitors the other branches of government.)

The Taiwan Smokers’ Rights Promotion Association (TSRPA) made the move about a week after several Taiwan Solidarity Union legislators accused the administration of having allowed different government agencies to use 30 percent of the surcharge revenue, which amounts to nearly NT$30 billion (US$949 million) a year, on unrelated matters.

“The administration has dismissed the allegations by claiming that there is nothing illegal about the matter,” said TSRPA director-general Chen Chi-an during a press conference in front of the Control Yuan. “It has also threatened to take legal action against whoever reports, shares or comments on such unfounded rumors.”

Chen said the agency’s “condescending response” had prompted the association to lodge the complaint against the HPA director-general Chiou Shu-ti on three grounds: dereliction of duty; benefiting specific individuals and political parties; and inadequate implementation of government policies.

The association urged the Control Yuan also to investigate appropriations of the tobacco surcharge’s revenue over the past few years.

The story said that Chiou could not be reached for comments as of press time but added that at a separate event earlier in the day she had said that the Tobacco Control Act stipulated that the surcharge on tobacco sales should be reviewed and adjusted every two years, but that six years had passed since the last increase in the levy.

“There are three major obstacles standing in the way of another increase: corporations, corporations and corporations,” Chiou was quoted as saying.

She said her agency’s plans were to raise the surcharge and sales tax on cigarettes by NT$20 and NT$5 per pack respectively in the near future, a plan that she said could reduce the nation’s smoking rate by 20.8 percent, prompt 740,000 smokers to quit and create a long-term benefit of about NT$296 billion to society.

Japan Tobacco moves to sharpen tobacco focus

| February 4, 2015

In announcing today its decision to withdraw from the beverage business, Japan Tobacco Inc said that enhancing the competitiveness of its tobacco business was the priority for its resource allocation.

In a note posted on its website, JT said that its board of directors had resolved to withdraw from the manufacture and sale of beverage products in Japan and that it expected to discontinue such operations by September.

‘After carefully considering the growth strategy for the manufacture and sale of JT beverage products, the company has concluded that it will be difficult to make a profitable contribution to the JT Group in the mid- to long-term,’ the note said in part.

JT entered the beverage business in 1988.

Flue-cured export earnings up hugely in Zimbabwe

| February 3, 2015

Zimbabwe’s flue-cured exports in January, at 23.5 million kg, were up by 327 percent on those of January 2014, 5.5 million kg, according to a story in the Zimbabwe Herald.

Export prices were said to have averaged $7.70 per kg in January, up from $4.22 per kg during January 2013.

As a result, flue-cured export earnings increased by 680 percent from $23.2 million to $181.7 million.

Zimbabwe’s 2014 flue-cured tobacco marketing season ended with 216.2 million kg having been sold, 30 percent more than was sold during the 2013 season, according to a story in The Herald in September.

Earnings were increased by 12 percent from USS612.1 million to US$685.2 million, but growers had to put up with an average price that was down by 14 percent from US$3.67 per kg to US$3.17 per kg.

One observer claimed in November that Zimbabwe could up its tobacco export earnings to about $6 billion if it made those exports in the form of cigarettes.

Administrators lead the way in South Lebanon

| February 3, 2015

Public administration buildings in South Lebanon are due to become tobacco smoke-free zones from March 1, according to a story by Mohammed Zaatari for the Daily Star that quoted an announcement by the South Lebanon Governor Mansour Daou.

The ban, part of Law 174, which prohibits smoking in all public places, will apply to all public administration buildings in the southern governorate, as well as police and military offices.

Those found to be in violation of the law will be liable to a fine of up to LL135,000.

The governor described the decision as a “civilizing” measure intended to curb the consequences of smoking, which he said were huge and affected everyone.

“We officials in public administration should be the first to implement Law 174 to serve as an example to others,” he added.

Smokers, however, will not be left with nowhere to go; as happens in some parts of the world, because special smoking zones will be created outside.

“They [smokers] will have to bear the cold of the winter and the sun of the summer and we will provide the ashtrays,” Daou said.

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