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Imperial tobacco volume down 23 billion

| November 4, 2014

Imperial Tobacco’s volume shipments of cigarettes and other tobacco products calculated as ‘stick equivalents’ (SE) during the 12 months to the end of September, at 294 billion, were down by seven percent on those of the 12 months to the end of September 2013, 317 billion.

The company said that the underlying fall in shipments, which excludes the impact of a stock optimization program that reduced trade inventories in a number of markets, was four percent.

And it said that underlying shipments of its Growth Brands were up by seven percent, driven by organic growth and brand migrations.

In its preliminary results, issued today, Imperial said that it had made significant progress in the year to the end of September, implementing a stock optimization program, managing its cost base and controlling its cash flows.

The stock program, which was now completed, had reduced trade inventories in some of the company’s major markets, affecting volumes by about nine billion SE.

Results had been affected also by market size declines.

But strong price/mix and cost control initiatives had mitigated some of these impacts.

‘Underlying revenue and volume results remove the impact of the stock program and give a clearer picture of how well we performed,’ the company said.

‘Total adjusted operating profit was stable at £3 billion. Underlying tobacco net revenue was up by two per cent.

‘The proportion of net revenue from our Growth Brands increased, improving the quality of our revenue and strengthening our sustainability.’

Meanwhile, Imperial reported that in Sweden and Norway it had enjoyed an ‘excellent performance’ from its Skruf brand that was behind ‘another set of strong results’ from its snus business, with share, volume, revenue and profit all increasing.

And it reported that, during the 12 months under review, it had entered the Egyptian market where it was concentrating on establishing its presence with Davidoff and Gauloises Blondes.

In July it had agreed to invest $7.1 billion (£4.2 billion) to acquire from US-based Reynolds American a number of assets that were being sold as a result of the acquisition of Lorillard by Reynolds.

The assets included a portfolio of US cigarette brands and blu, the number one electronic cigarette brand in the US.

The cigarette brands were being acquired without historic product liabilities.

Meanwhile, Imperial’s stand-alone, non-tobacco subsidiary, Fontem Ventures, had launched the Puritane electronic cigarette brand in the UK in February.

Fontem was focused also on expanding its presence across Europe with a ‘second e-vapour product’, though earlier expansion plans had been revised after Imperial had agreed to buy blu, which was sold in the UK.

Fontem continued to assess other potential product launches, in a variety of non-tobacco lifestyle consumer categories, while further developing and licensing its patented technologies.

“This has been a year of significant delivery by Imperial,” said chief executive, Alison Cooper.

“We’ve strengthened our brands and market footprint, improved cash conversion to 91 percent, reduced debt by £1 billion and delivered another 10 percent dividend increase to shareholders.

“We’ve completed our stock optimization program and realized over £60 million of further savings through our cost optimization program.

“We’ve achieved what we set out to achieve, creating a stronger business in the process.

“Trading conditions remain tough in many territories but the actions we’ve taken to enhance the quality and sustainability of the business have put us in a stronger position to drive growth and create sustainable value for our shareholders.”

Flavor intensity and pack elements link new products from different brands

| November 4, 2014

Flavor and aroma are the keys to two new products due to be launched by Japan Tobacco Inc next month.

The company said in a note posted on its website today that Cabin Gold Wild 8 Box and Caster Gold Silk 6 Box would bring out the best flavor and aroma characteristics of the Cabin and Caster brands through the use of special tobacco cutting methods and refined blends.

The new products are aimed both at Cabin and Caster smokers, and smokers new to these brands.

JT said that the Cabin brand was already renowned for its crisp roasted flavor and rich aroma, which was achieved by the ‘lavish inclusion’ of Burley tobacco in the blend and a heating process that roasted the flavor into the tobacco. Now, JT said, the production of Cabin Gold Wild 8 Box was employing a method in which the tobacco leaves were cut more coarsely than was usual and were processed at high temperature.

This, and the refinements to the blend, brought out the best of the Cabin flavor and aroma, offering consumers a roasted flavor they had never experienced before.

Meanwhile, the Caster brand was already known for its use of a subtly sweet aromatic flavoring that produced a smooth and sophisticated, mellow smoking experience. Now, the production of Caster Gold Silk 6 Box employed a method in which the tobacco leaves were cut more finely than was usual. This, and the refinements to the blend, brought out the best of the Caster flavor and aroma, providing consumers with a ‘prominent smooth taste’.

The two products, though from different brand families, are sharing pack design features.

JT said that the link between the two products, the way in which they each embodied a relentless pursuit of ideal qualities, was being symbolized by a common design motif inspired by a cross. And each brand name was being presented in a gold color to give the products a more luxurious, sophisticated look.

However, the main color of the Cabin pack is red, which is seen as expressing its rich, full-bodied, and roasted qualities, while white is used to reflect the smooth and mellow properties of Caster.

RAI to host investor presentation

| November 4, 2014

The management of Reynolds American and its operating companies will discuss the companies’ performances and plans during presentations to the investment community on November 17.

The presentations will be webcast on a listen-only basis at www.reynoldsamerican.com from about 09.00 Eastern Time.

Registration is currently available at http://www.media-server.com/m/p/yo83hvge – under Events & Presentations of the Investors section of the RAI website, http://www.reynoldsamerican.com/.

Video: Alison Cooper comments on Imperial’s 2014 results

| November 4, 2014

Imperial Tobacco full-year 2014 results interview with CEO Alison Cooper & CFO Oliver Tant. This video was published by MerchantCantos.

PMI granted right to challenge Products Directive through EU Court of Justice

| November 3, 2014

Subsidiaries of Philip Morris International today obtained a green light from an English Court to challenge the EU’s Tobacco Products Directive before the Court of Justice of the European Union (CJEU), according to a note posted on PMI’s website. Key questions regarding the Directive’s validity will be referred to the CJEU as ordered by Mr. Justice Turner during a hearing at the Royal Courts of Justice.

“This marks an important first step for our challenge of the EU’s Tobacco Products Directive,” said Marc Firestone, PMI’s senior vice president and general counsel.

“We believe the directive disrupts the balance that the EU treaties establish between the Union and the member states, and we are looking forward to a thorough, objective review by the EU’s highest court.

“There is no disagreement that tobacco products should be strictly regulated, but measures must honor the EU treaties. The Directive purports to improve the internal tobacco market, yet instead includes a mix of product bans, mandates, and delegations of authority that raise serious questions under the EU treaties about consumer choice, the free movement of goods, and competition.”

PMI said it had requested the reference to the CJEU when it filed its case on June 27. The company is seeking a review of whether the directive complies with the EU Treaties in the following areas:

* ‘Legal Competence: The EU’s power to adopt the directive under the EU treaties is limited to measures that improve the internal market in tobacco products,’ the note said. ‘While the directive claims to serve that objective, it demonstrably lacks any real internal market rationale. For example, the directive claims to be harmonizing differences in member state laws by forcing member states to ban menthol, even though menthol is legal in all 28 member states. Meanwhile, it actively encourages disharmonization by inviting member states to adopt a patchwork of other measures such as “plain packaging” even though they obstruct the free movement of goods and violate EU law. Provisions such as these ignore clear precedent from the CJEU establishing the limits of the EU’s authority under the treaties, and create obvious incentives for illegal trade.

*’Fundamental Rights: The directive appears to ban truthful and non-misleading claims on the packaging of tobacco products. PMI intends to seek review of whether this ban respects the fundamental rights of consumers to information about the products they are choosing.

* ‘Delegated Acts: The directive delegates a number of powers to the Commission to enact rules on essential aspects of the directive. PMI intends to seek review of whether these delegations of power comply with the EU treaties.’

The CJEU is expected to issue a judgment within two years.

 

Nepal goes for 90 percent pack warnings

| November 3, 2014

The government of Nepal decided on Thursday to make it mandatory for tobacco companies to devote ‘at least 90 percent’ of their packs to health warnings, according to a story in The Kathmandu Post.

It wasn’t clear from the report whether the warnings will have to cover 90 percent of the front, 90 percent of the front and back, or 90 percent of the whole pack.

At present, health warnings take up 75 percent of the front and back surfaces.

A group of tobacco companies challenged the May 2011 legislation that brought in the 75 percent warnings, but that challenge was quashed by the Supreme Court in December 2013.

The challenge was made on the grounds that 75 percent far exceeded the requirements in neighboring countries.

In opting for 90 percent, Nepal has once again moved ahead of countries such as India and Thailand, where the requirement is for warnings to cover 85 percent of packs.

According to the Ministry of Health and Population, 70 percent of the new warnings will include pictures, while 20 percent will be taken up with statutory warnings in Nepali.

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