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Tag: profits

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Indonesia: Cigarette makers blame costs for lower profits

| April 25, 2013

Cigarette manufacturers in Indonesia blamed higher production costs and currency fluctuations for the slow-down in their business throughout 2012.

Revenues at PT Gudang Garam increased by 17.1 percent to reach IDR49.03 trillion ($5 billion). However, their spending also increased, jumping 25.6 percent to IDR39.84 trillion. The higher spending and losses from currency fluctuations ultimately saw the company book IDR4.01 trillion in net profits in 2012, an 18 percent decline from the previous year, according to a story in the The
Jakarta Post.

Another cigarette maker, PT Bentoel Internasional Investama announced that its revenues fell slightly by 2.2 percent to IDR9.85 trillion. Along with Gudang Garam, it also posted higher costs of goods sold (COGS) last year, which were up 5.5 percent to IDR8.18 trillion.

Bentoel said that it suffered IDR323.35 billion in net losses, compared to IDR306 billion in net profits in 2011. In a statement submitted to the Indonesia Stock Exchange, it attributed the net losses to the significant increase in the clove price. At the same time, it added, sales dropped as a result of higher excise duties.

Meanwhile, PT HM Sampoerna reported a 26 percent rise in revenues to IDR66.63 trillion in 2012, as a result of higher sales. Last year, it managed to sell up to 107.7 billion cigarettes, a rise of 17.4 percent from 2011.

Sampoerna’s COGS were up by almost 28 percent to IDR48.12 trillion and its net profits surged 23.3 percent to IDR9.94 trillion in 2012. The increased COGS pushed the company’s net profits-to-revenue margin down to 14.9 percent from the previous 15.3 percent in 2011.

Separately, PT Wismilak Inti Makmur reported that its revenues climbed 20.9 percent to IDR1.12 trillion from 2011, thanks to higher sales, which grew 11 percent to 2 billion cigarettes. With higher sales, the company also reported a surge in its COGS, which increased 22.6 percent to IDR814.42 billion.

However, despite recording positive growth in revenue, Wismilak suffered from lower net profits in 2012, which slumped 40.3 percent to IDR77.2 billion.

This year the government plans to increase excise duty by 8.5 percent.

According to Trust Securities analyst Reza Priyambada, overall, the cigarette makers faced similar problems throughout 2012 with increasing raw material prices and higher excise. “It was like they were ‘attacked’ from the top and from the bottom,” he said.

Reynolds American profits jump 88 pct in Q1, volume down

| April 24, 2013

Consumers squeezed by higher gas prices and an increase to the payroll tax led Reynolds American Inc. to report a sharp drop in cigarette volumes in the first quarter.

“Overall, the external environment remained challenging,” President and CEO Daniel Delen said. “Industry cigarette volumes were negatively impacted by higher energy prices, the expiration of the payroll-tax holiday and fewer shipping days,” according to a story posted on 4-traders.com.

Profit, meanwhile, jumped 88 percent in the quarter due to lower costs and a $202 million credit tied to a landmark tobacco settlement. Adjusted profit was higher than Wall Street expected, aided by higher cigarette prices and strong demand for smokeless products, though the decline to net sales was worse than anticipated.

Reynolds American and rival tobacco companies face a difficult operating environment as cigarette volumes have been declining for years. A weak economy and high unemployment have continued to pressure consumers’ disposable income. But an estimated 6.2 percent drop to cigarette volumes in the first quarter was more bruising than historical trends, with declines generally averaging 3 percent to 4 percent in recent years. Domestic cigarette shipment volume at the R.J. Reynolds unit fell 8.7 percent in the first quarter, though when adjusting for the two fewer shipping days, the company estimates its cigarette volume dropped about 5.6 percent.

The company’s total cigarette retail market share dropped to 26.1 percent from 26.7 percent, the eighth consecutive year-over-year decline.

Camel and Pall Mall, the company’s core brands, performed better than the overall cigarette unit. Volumes slid 5.5 percent for Camel and 2 percent for Pall Mall, and both posted higher market share. Together, they represent more than two-thirds of the company’s total market share.

Higher 1Q profit, revenue expected from PMI

| April 17, 2013

Philip Morris International Inc., which sells Marlboro and other brands abroad, is expected to report higher profit and revenue when it releases its first-quarter results before the market opens on Thursday. Whether cutting costs and raising prices continued to help PMI compensate for consumers buying fewer, or cheaper, cigarettes has investors anticipating the announcement.

Cigarette shipments rose about 3 percent to 233.1 billion in the fourth quarter that ended in December, and it market share rose in a number of key markets, according to a story in The Washington Post.

Shipments grew 7 percent in the company’s region that encompasses Eastern Europe, the Middle East and Africa, but fell about 6 percent in the EU as the region continues to be under pressure due to high unemployment and the continent’s government debt crisis. Shipments also fell about 1 percent in Latin America and Canada.

In Asia, one of its largest growth areas, shipments grew nearly 6 percent. The company benefited from increases in Japan following the March 2011 earthquake and tsunami.

The events offered the company a sales opportunity because supply disruptions led Japan Tobacco Inc., the world’s No. 3 tobacco maker, to stop shipping cigarettes within Japan.

Philip Morris International also bought the Philippines company Fortune Tobacco Co. in February 2010, bolstering its Asian business.