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22nd Century settles litigation with former CEO

| November 9, 2015

22nd Century Group, a leader in tobacco harm reduction, announced Nov. 9 that the company and its former CEO and founder, Joseph Pandolfino, have settled all litigation and disputes between the parties.

“As the founder of 22nd Century and as a major stockholder, Joe’s interests are closely aligned with those of other shareholders,” Henry Sicignano III, 22nd Century’s CEO and president stated in a press release. “We look forward to Joe’s helpful input going forward as a strategic consultant who will be tasked with assisting 22nd Century on special projects such as commercialization of Red Sun, Magic and our extraordinary modified risk tobacco products in development: ‘Brand A’ and ‘Brand B.’”

Joseph Pandolfino said, “I am thrilled that all disagreements between me and the company have been resolved. As a strategic consultant, I look forward to working with Henry and the team to create shareholder value. 22nd Century is a unique company with an important public health mission and I remain dedicated to its success.”

The details of the settlement have been disclosed by the 22nd Century in its filing with the U.S. Securities and Exchange Commission (SEC) of a current report on Form 8-K, which is publicly available on the SEC’s EDGAR database on the SEC website,

Buyers in Malawi told to ‘stop growing tobacco’

| November 9, 2015

AHL Group of Companies, Malawi’s sole tobacco and other commodities dealing company, has asked the Ministry of Agriculture and Food Security to consider reversing its decision to allow tobacco multinationals to grow tobacco, according to Malawi24. AHL Group says the policy is hurting ordinary tobacco farmers.

AHL Group’s general manager, Moses Yakobe, has urged the government to bar tobacco multinationals from owning big farms and growing tobacco.

“The question is, what will smallholder farmers do if the business of growing tobacco is also being done by these companies?” Yakobe asked during the official launch of 2015 field meetings and the best burley club award presentation ceremony in Lilongwe.

Speaking during the same function, Kapichila Banda, president of the Farmers Union of Malawi, concurred with Yakobe, pointing out that farmers are not currently making profits because the demand is being swallowed by the multinational tobacco companies who grow tobacco in large quantities.

“This is very dangerous to our smallholder farmers,” said Banda.

At the function, AHL Group, which has been buying tobacco for the past 80 years, awarded K500,000 to Kanthunkako Burley Club, the winner of the 2015 club of the year competition.

Subsidiary companies under AHL Group include Agriculture Trading Company, Malawi Leaf Company and Tobacco Investment, among others.

Support for trade agreement with tobacco ‘carve-out’

| November 9, 2015

The Campaign for Tobacco-Free Kids (CTFK) is urging the US Congress to approve the Trans-Pacific Partnership (TPP) trade agreement, which, if passed, could not be used by the tobacco industry to launch legal challenges against public health measures aimed at reducing tobacco use.

Last week, the text of the TPP, whose eight-year-long negotiations were kept secret from the public, was finally published by the 12 countries that are signatories to the agreement: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam.

The TPP’s implementation would mean the phasing-out of thousands of import tariffs and other trade barriers, the establishment of uniform rules on corporations’ intellectual property, a new code of conduct governing lawyers selected for Investor-State Dispute Settlement (ISDS) panels, and a tobacco ‘carve-out’ from the dispute system that otherwise would allow foreign corporations to challenge governments’ health policy decisions.

ISDS provisions of the TPP proved to be some of the most controversial and taking tobacco out probably allowed the negotiations to continue.

The CTFK described the agreement as a ‘truly historic step for public health’ because it ‘includes a provision that protects the right of participating nations to adopt public health measures to reduce tobacco use and prevents tobacco companies from using the TPP to launch legal attacks on such measures’.

‘This provision is a critical step toward ending the tobacco industry’s growing abuse of trade agreements to challenge life-saving tobacco control measures all over the world,’ the CTFK’s president Matthew L. Myers said in a statement issued through PRNewswire. ‘It sets a precedent for other trade agreements and boosts efforts to combat a global tobacco epidemic that kills millions each year.

‘Until Congress approves this agreement, the tobacco industry and its allies are certain to make every effort to defeat or weaken the provision protecting tobacco control measures. We urge President Obama and members of Congress to stand firm and reject these efforts.’

The New York Times reported in October that even though President Obama had ‘fast track’ trade promotion authority ensuring that trade pacts received expedited consideration in Congress with a yes-or-no vote without amendments or filibusters, the TPP could face months of debate.

At that time – before the text was announced – the Times said that labor unions, environmentalists and liberal activists were expected to argue that the TPP favored big business over workers and the environment.

Volumes down at JT and JTI in first nine months

| November 6, 2015

Japan Tobacco Inc.’s domestic cigarette sales volume during the nine months to the end of September, at 81.3 billion, was down by 3.1 percent on that of the January-September period of 2014, 83.9 billion.

In announcing its consolidated results on Wednesday, JT said that volume sales had fallen because of an industry-wide volume decline and because of intensified competition in the sub-premium price segment.

Core domestic cigarette revenue had declined by 1.1 percent (from ¥483.5 billion to ¥478.2 billion) as a result of the lower sales volume, partly offset by an improved price/mix effect, which mainly occurred in the first quarter, and higher domestic sales of duty-free products.

Adjusted operating profit had increased by 5.1 percent (from ¥187.9 billion to ¥197.6 billion) due to the price/mix effect and the effects of measures taken to strengthen competitiveness. JT reported that in order to strengthen brand equity further, it had continued to undertake marketing and sales initiatives primarily focused on its Mevius brand.

‘In the framework of activities to fortify the brand portfolio, two Seven Stars menthol products were launched to support our growth in the expanding menthol segment,’ the company said. ‘This was in addition to the recent integration of the Caster and Cabin brands with Winston.

‘In a highly challenging competitive environment, JT’s overall share of market has remained stable at 59.9 percent for the nine-month period.’

Meanwhile, Japan Tobacco International’s total cigarette and cigarette-equivalent shipment volume, which includes fine cut, cigars, pipe tobacco and snus, but excludes contract manufactured products, waterpipe tobacco and emerging products, during the nine months to the end of September, at 295.6 billion, was down by 0.4 percent on that of the January-September 2014 period, 296.6 billion.

Within that total, GFBs (global flagship brands) shipment volume was increased by 5.7 percent to 205.4 billion.

The growth in GFB shipment volume was mainly driven by the markets of the Benelux countries and those in Canada, Czech Republic, France, Germany, Iran, Italy, Romania, South East Asia, Spain, Taiwan, Turkey and Ukraine.

‘Total shipment volume declined by a modest 0.4 percent, mainly due to the Middle East and Russia, partly offset by GFB growth and favorable trade inventory movements in Iran and Turkey, the company reported.

‘Market share continued to grow in most of the key markets, namely France, Italy, Spain, Taiwan, Turkey and the UK.’

JTI’s core revenue and adjusted operating profit in US dollars at constant foreign exchange grew by 7.3 percent and 13.3 percent respectively, driven by a robust price/mix and a positive GFB performance.

‘As a result of continued currency fluctuations against the US Dollar, on a reported basis, core revenue and adjusted operating profit declined 14.0 percent and 21.4 percent respectively,’ the company reported.

‘In Japanese Yen, core revenue increased 1.1 percent [from ¥936.9 billion to ¥946.9 billion] and adjusted operating profit decreased 7.7 percent [from ¥355.7 billion to ¥328.5 billion] due to the appreciation of the US Dollar.

Including the results of its other businesses, JT’s January-September revenue increased by 0.7 percent to ¥1,688.5 billion while its adjusted operating profit decreased by 2.6 percent to ¥510.3 billion.

Operating profit was down by 7.2 percent to ¥455.9 billion.

JT’s president and CEO, Mitsuomi Koizumi, said that the company’s international tobacco business had demonstrated a solid performance, driven by increased GFB shipment volume and significant pricing benefits.

“We will accelerate our investments to strengthen brand equity, geographic reach and our emerging products portfolio to continue achieving sustainable mid- to long-term profit growth,” he said.

“Domestically, against the backdrop of increasingly intensifying competition, initiatives to strengthen the product portfolio and brand equity further have ensured that our market share remains stable.

“The ongoing solid business momentum gives us confidence to achieve mid- to long-term profit growth at constant FX, allowing us to revise the forecast for year-end dividend per share upwards.”

Leaf tobacco markets headed for better balance

| November 6, 2015

Weather patterns and reduced plantings in some parts of the world are expected to bring leaf tobacco markets largely into balance, according to George C. Freeman, III, chairman, president, and CEO of Universal Corporation.

“We are monitoring weather conditions around the world that will likely have a negative impact on 2016 crop quality and production levels,” Freeman said in announcing the company’s results for the six months to the end of September.

“As a result of the recent heavy rains and hail in southern Brazil from an El Nino weather pattern, we have reduced production projections for both flue-cured and Burley in that country by about eight percent,” he said. “The smaller crop sizes could decrease our buying program there next year.

“The same weather pattern may also affect Africa, decreasing rainfall and impacting crop sizes and quality.

“We believe that the combination of this weather pattern and reduced plantings in some origins will bring markets largely into balance in fiscal year 2017.”

Universal’s net income for the six months to the end of September was $16.5 million or $0.40 per diluted share, up from $15.7 million or $0.35 per diluted share during the same period of last year.

For the second fiscal quarter to the end of September, net income was $22.5 million or $0.81 per diluted share, down from $15.0 million or $0.48 per diluted share during the second fiscal quarter of 2014.

Segment operating income for the first half of fiscal 2016 was increased by $13.7 million to $34.6 million, while for the second fiscal quarter it was up by $9.6 million to $38.1 million.

“We are pleased with the performance of our operations in the first half of this year, which has progressed as expected given the lingering effects of an oversupplied market,” said Freeman.

“Our results for the six months ended September 30, 2015, include higher sales volumes, lower overhead costs, and better overall margins in our key operating regions, due in part to efforts in recent years to improve efficiencies and reduce costs in our business.

“We continue to support supply chain efficiencies, such as in Poland where we recently announced an agreement to assume processing of tobaccos in crop year 2015 for a major customer, giving rise to improved processing efficiencies in that country.”

Indonesia unveils big tobacco excise increases

| November 5, 2015

The Indonesian government has said that it will impose an average 11 percent excise increase on tobacco products next year, according to a story in The Jakarta Post.

Indonesia has seen annual tobacco excise increases of about 11 percent since 2010, but the administration of President Joko Widodo had considered imposing a 23 percent increase next year, in part at least to bolster its flagging income.

But in announcing on Tuesday the 2016 increase, Heru Pambudi, the Finance Ministry’s director general of customs and excise, said tobacco excise was imposed not only for the sake of revenue, but also to control its consumption.

The government has opted not to increase the excise on hand-rolled cigarettes produced by small companies, saying it wants to support labor-intensive industries. And while machine-rolled ‘white’ cigarettes, defined as those not containing cloves in the tobacco mix, will be subjected to the highest excise increase, that rise will not reach 20 percent, according to Heru.

The Post reported that the excise announcements had been made just over a week after President Joko oversaw the signing of a $2 billion investment deal by Philip Morris International, which has a 98 percent stake in H.M. Sampoerna, Indonesia’s biggest cigarette company.

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