Alliance One Tobacco Kenya has announced that it will begin to scale down its operations in Kenya, citing a slump in the leaf tobacco sector. As part of the scale-down process, the company will no longer sponsor tobacco farmers that have been growing leaf tobacco on a contract basis and will cease field operations beginning July 1.
Alliance One Tobacco Kenya’s managing director Francis Chege said the company “is proud to have been a part of the tobacco industry in Kenya for the past 25 years, but unfortunately customer demand for the Kenyan supply has declined, and the company has been forced to realign its operations to changing market conditions.”
The company will continue to maintain a small presence in Kenya through its processing base in Thika.
Alliance One International (AOI) has announced its intention to enter the Ugandan tobacco leaf market once all relevant governmental approvals and licenses, including registration of its new Ugandan subsidiary, Alliance One Tobacco Uganda (AOU), are complete.
AOU’s core business plans to include providing agronomy services to tobacco growers through an integrated production system that supports sustainable compliant tobacco leaf production. To execute on its plan, AOU expects to employ agronomy and support staff in Uganda, drawing from local talent to develop a dedicated country team. To meet first-year production goals, AOU intends to register and sponsor farmers that produce both flue-cured and burley tobaccos for the upcoming 2015 crop.
“Once complete, the addition of Uganda to our existing African footprint further strengthens our regional position as a leading supplier to both new and existing customers,” says Pieter Sikkel, AOI’s president and chief executive officer.
“Ugandan tobaccos have a good range of quality flavor and semi flavor styles that complement tobaccos from our other supply origins. We are excited about the heightened prospects for Ugandan tobacco on the world market.”
Alliance One International and Ioto International have completed the formation of a joint venture, Ioto E-Liquids America. Located in Greenville, North Carolina, USA, Ioto-ELA will produce flavored liquids for electronic vapor products.
AOI’s strength in the global leaf market and Ioto’s worldwide market position in flavors establishes a solid base to grow the new company, according to Ioto founders Bianca Iodice and Gilson Torrens.
“Our [joint venture] with Ioto delivers enhanced value to our customers by leveraging both partners’ unique strengths and establishing a strong position in e-liquid flavor formulations, manufacturing processes and distribution,” says Anthony Dillon, AOI’s director of global strategic projects. “Our products are well received by the market, and we see significant growth potential for this business segment based on increasing industry opportunities and our strengthening competitive position.”
“Ioto is among world leaders in developing and producing unique proprietary flavorings and other specialty products,” says Pieter Sikkel, AOI’s president and CEO. “As such, we are very pleased to be partnering with them to produce e-liquids for our customers serving the e-vapor market.
“Aligned with our goals of measured growth in this industry segment, Ioto-ELA immediately strengthens the value we bring to customers by delivering dynamically innovative, high-quality, sustainably produced, compliant products that are manufactured to strict standards and should provide enhanced value to our stakeholders.”
Alliance One International reported a net loss of $36.9 million for the first quarter that ended June 30. In the comparable 2012 quarter, the company posted a net loss of $30.7 million.
Revenues for the quarter improved $26.1 million to $383.9 million versus last year. Total kilos sold, at 76.3 million, was similar to last year’s quarter, generating $370.7 million in tobacco revenues and $13.2 million in processing and other income.
Alliance One President and CEO Pieter Sikkel expects volume and revenue for the full year to be better than that recorded last year, due to anticipated customer shipping schedules.
“Our first fiscal quarter is usually a lower-revenue quarter in comparison to other quarters during the year, based on the timing of crops from the growing regions where we source tobacco,” he said. “This year’s first quarter is consistent with past experience.”
Sikkel said the company’s quarterly performance had been affected by several factors, including restructuring expenses, disappointing recoveries of advances to tobacco suppliers in Zambia and the appreciation of the Malawi kwacha and other currency versus the U.S. dollar.