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JT in agreement to acquire US vapor company Logic

| April 30, 2015

Japan Tobacco Inc. said today that it had entered into an agreement to acquire Logic Technology Development, one of the leading US electronic cigarette ‘brands’.

JT described Logic, which was founded in 2010, as selling a full range of high-quality rechargeable, ready-to-use and disposable electronic cigarettes, including the Logic Pro tank system, newly launched this month.

“With the Logic brand and its strong portfolio of products, the JT group has a sizeable participation in the largest and fast-growing US e-cigarette market,” said Masamichi Terabatake, Japan Tobacco International’s executive vice president and deputy CEO. “Logic’s well established presence in the US, in addition to our acquisition of E-Lites in the UK, further underpins our global ambitions to become the leader in emerging products.”

JT said that the executive management team of Logic would remain with the JT group post-acquisition in order that the group could benefit from the team’s extensive knowledge and experience of the US electronic cigarette market.

“With the backing of JT group’s global resources, we believe Logic is uniquely positioned to accelerate its growth in the US market and further enhance its product offering.” said Eli Alelov, Logic’s co-founder and CEO.

“We are excited about the transaction and look forward to the next phase of Logic`s development with the JT group,” added Howard Panes, Logic`s co-founder.

The transaction will be funded by the group’s existing cash and loan facilities, with an expected minor effect on the group’s consolidated performance for the fiscal year 2015.

JT expects to complete the acquisition in the third quarter of fiscal year 2015 following regulatory clearance.

JT’s total domestic and international sales fall in 1Q

| April 30, 2015

Japan Tobacco Inc’s domestic cigarette volume sales during the three months to the end of March, at 25.5 billion, were 16.2 percent down on those of the three months to the end of March 2014, 30.4 billion.

JT reported today that the volume decline was down to an unfavorable comparison with that of the same period of the previous year when there was an increase in demand ahead of an April consumption tax hike.

‘As a result, core revenue and adjusted operating profit declined 12.6 percent and 14.3 percent respectively, partially offset by the price/mix effect and continuous cost reduction initiatives,’ the company said.

‘Amid intensified market competition the company continued to undertake marketing and sales initiatives primarily focused on Mevius. The February launch of three Premium Menthol Option Yellow products, an extension to the popular Premium Menthol line, underpinned the steady growth of the Mevius family’s overall share, which has been continuously improving to reach 32.1 percent this quarter from 31.3 percent in April–June 2014.’

Meanwhile, Japan Tobacco International’s shipment volume during the three months to the end of March, at 88.1 billion, was up by 0.5 percent on that of the three months to the end of March 2014, 87.7 billion. At the same time GFB (global focus brands) volume increased by 8.4 percent from 55.3 billion to 60.0 billion.

JT said that JTI’s volume increases had reflected positive performances in the Benelux markets, France, Germany, Italy, the Middle East, Spain, Taiwan and Turkey, as well as favorable trade inventory adjustments in the Middle East and Turkey. Market share had increased in a number of countries including France, Spain, Turkey and the UK.

‘Core revenue and adjusted operating profit declined 0.5 percent and 0.1 percent respectively, as a result of a number of local currencies depreciating against the US Dollar,’ JT said. ‘This was partially offset by the depreciation of the Japanese Yen against the US Dollar. In US Dollars, core revenue and adjusted operating profit declined 14.2 percent and 13.8 percent respectively. At constant FX, driven by robust price/mix, adjusted operating profit grew 13.1 percent, while core revenue increased 6.5 percent.’

JT’s revenue during the three months to the end of March, at ¥554.9 billion, was down by 5.5 percent on that of the three months to the end of March 2014. Adjusted operating profit was down by 2.9 percent to ¥158.6 billion, operating profit was down by 8.4 percent to ¥143.4 billion, while adjusted operating profit was increased by 5.6 percent to ¥172.5 billion.

“In a challenging business environment, including currency volatility, our international tobacco business fundamentals remain strong, and pricing continues to be a key driver, reflecting the strength of our brands,” said JT’s president and CEO, Mitsuomi Koizumi, in announcing the consolidated results.

“Domestically, despite intensified market competition, since last April Mevius has steadily extended its market share through a number of initiatives aimed at strengthening brand equity.

“Looking ahead, I believe our performance this quarter has provided a solid foundation for the 12-month forecast.”

Ninety percent health warnings have majority support

| April 30, 2015

Most Indonesians support the use of graphic health warnings on cigarette packs and agree that the size of the pictures should be increased, according to a story in the Jakarta Globe quoting the results of a recent survey.

The national survey on the implementation of graphic health warnings in Indonesia found that 84 percent of respondents agreed that the graphic health warnings on cigarette packaging made them concerned about the dangers of smoking.

It found also that 90 percent of respondents agreed that the size of the graphic images should be increased to cover 90 percent of the packaging. Indonesia currently requires that at least 40 percent of the surface of packs should be covered with health warnings.

The survey was carried out by 20 institutions including the Indonesian Tobacco Research Alliance, the Association of Indonesian Public Health Experts’ Tobacco Control Support Center and the International Union Against Tuberculosis and Lung Disease.

The survey, whose results were released yesterday, was conducted between March 2014 and March 2015 and involved 5,409 respondents in 18 cities.

PMI to webcast May 6 annual meeting

| April 30, 2015

Philip Morris International is due to host a live audio webcast of its 2015 Annual Meeting of Shareholders at www.pmi.com/webcasts starting at 09.00 Eastern Time on May 6. The webcast will be in listen-only mode.

During the meeting, Louis C. Camilleri, chairman of the board, will address shareholders and answer questions, while CEO André Calantzopoulos will give the business presentation.

The audio webcast can be accessed also on iOS or Android devices by downloading PMI’s free Investor Relations Mobile Application at www.pmi.com/irapp.

An archived copy of the webcast will be available until 17.00 on June 4 at www.pmi.com/webcasts.

Presentation slides and the script will be available at www.pmi.com/presentations.

BAT’s first quarter cigarette volume down 3.6 percent

| April 29, 2015

British American Tobacco’s cigarette volume during the three months to the end of March, at 152 billion, was said by the company to be down by about 3.6 percent on that of the first quarter of 2014, 158 billion.

Volumes were depressed in each of the company’s four regions: from 50 billion to 49 billion in its Asia Pacific region; from 31 billion to 29 billion in its Americas region; from 24 billion to 23 billion in its Western Europe region; and from 53 billion to 51 billion in its Eastern Europe, Middle East and Africa region.

According to an interim management statement issued today, BAT’s five Global Drive Brands recorded a volume increase of 5.7 percent. ‘Dunhill volume increased by 1.2 percent, as good growth in Indonesia and Brazil outweighed lower volume in South Korea and the GCC [Gulf Co-operation Council countries],’ BAT said.

‘Kent volume was 1.6 percent lower, as higher volume in Iran and Turkey was more than offset by lower volume in Russia, Japan and Romania.

‘Lucky Strike was 5.0 percent higher with increases in Mexico, France and Belgium more than compensating for lower volume in Japan and Italy.

‘Pall Mall volume was up 2.4 percent as growth in Pakistan, Poland and Mexico more than offset reductions in Italy and Russia.

‘Rothmans volume increased by 36.9 percent, driven by a strong performance in a number of markets, including Russia, Australia, Kazakhstan, Turkey and Italy.

Meanwhile, the company’s total tobacco volume, including the volume of tobacco products other than cigarettes calculated as cigarette stick equivalents, fell by about 3.6 percent from 164 billion to 158 billion.

BAT reported that the trading environment remained ‘challenging due to continued pressure on consumers’ disposable income worldwide and the impact of adverse exchange rates at a transactional level’.

However, it said that Vype had continued to deliver excellent organic growth in the UK e-cigarette market, providing a strong platform for planned launches in other countries in 2015.

‘We remain on track to launch Voke, a nicotine inhalation product licensed as a medicine, in the UK later this year, and we continue to make good progress in tobacco heating products, with plans to test market a product in 2015,’ it added.

Group revenue for the three months to the end of March, at constant rates of exchange, grew by 1.7 per cent on that of the three months to the end of March 2014, but fell by 5.8 percent at current exchange rates.

“The Group continued to perform well in the first three months of the year despite the challenging trading environment,” chief executive Nicandro Durante said in presenting the results.

“Our market share increased by 40 bps driven by our Global Drive Brands which continue to deliver strong share and volume growth.

“Revenue increased at constant rates of exchange, driven by pricing more than offsetting lower volume, while adverse exchange rate movements led to a reduction in reported revenue.

“I remain confident that we will deliver another year of good earnings growth at constant rates of exchange, with performance significantly skewed to the second half of the year principally due to a strong first-half volume comparator and the timing of price increases.”

Indonesian excise bands cause health concerns

| April 29, 2015

The Indonesian Consumer Foundation (YLKI) said yesterday that the pictorial health warnings on more than half of the tobacco product packs it had examined as part of a survey had excise bands over the top of them, according to a story in The Jakarta Post.

Government regulations stipulate that cigarette packs must carry pictorial warnings that must not be covered by anything, including excise bands.

According to a version of the story relayed by the TMA, the survey, which was conducted from February to March, looked at tobacco products offered by PT Hanjaya Mandala Sampoerna (PMI), PT Bentoel (BAT), PT Gudang Garam, PT Djarum, and by ‘local’ companies such as Nojorono Tobacco International.

PT Bentoel was said to have had the lowest compliance with the regulation with all of the pictorial warnings on the sampled products covered by excise bands.

Local brands led in compliance with 65 percent.

YLKI urged the Finance Ministry to issue slimmer excise bands along with regulations governing the placement of the bands.

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