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BAT sales up 5 pct, driven by global brands

| April 25, 2013

British American Tobacco reported revenue growth of 5 percent at constant rates of exchange in the first quarter ended March 31, adding that global drive brand cigarette volumes grew by 1 percent.

The report stated:

  • Revenue growth of 1 percent at current rates of exchange.
  • Cigarette volumes from subsidiaries fell 3.7 percent to 160 billion, with a decrease of 3.4 percent for total tobacco volumes.
  • Board confident of another year of earnings growth in line with long term strategic goals.
  • Pricing environment remains strong despite difficult trading conditions in many parts of the world, notably southern Europe.
  • If current exchange rates persist for the rest of the year, the currency headwind that adversely impacted the quarter will reverse.
  • Group has sufficient financing and facilities available for the foreseeable future.
  • There have been no material events, transactions or changes in the financial position of the Group since the year end.
  • -Shares closed Wednesday at 3548 pence valuing the company at £68.25 billion.

IMHA urges brand protection

| April 25, 2013

The trade body representing the global hologram industry is urging organisations to review and if necessary redouble their brand protection and authentication strategies to stem the “hemorrhage” of counterfeit goods flowing out of china.

That’s the stark message from the International Hologram Manufacturers Association (IHMA) which was commenting on a new UN report that says a staggering 75 percent of all the fake goods seized worldwide between 2008 and 2010 came from China.

According to the UN Office on Drugs and Crime (UNODCO), these counterfeit goods make up almost 2 percent of global trade while organized crime groups, who deal in fake goods and drugs among other items, are pocketing $90 billion annually across the Far East region.

The Transnational Organised Crime in East Asia and the Pacific: A Threat Assessment is the most comprehensive study yet on the subject.

The report is a sobering reminder that the war on counterfeiting is far from over, says the IHMA, and will be a wake-up call for those desperate to protect brands and profits not only in the Far East but worldwide.

UK campaigners condemn ‘sexist’ study on plain packaging

| April 25, 2013

Campaigners in the U.K. opposed to plain packaging of tobacco have described as “sexist” a study that says young female smokers get less satisfaction and less enjoyment from smoking cigarettes that come in plain, standardized packs.

Hands Off Our Packs campaigner Angela Harbutt, a smoker, said, “The idea that plain packaging will have a greater impact on young women suggests that women are more easily influenced than men. This is not only an outdated view of women, it’s also incredibly sexist.

“Women can think for themselves and if they enjoy smoking, as many do, the packaging will make no difference. It may influence which brand they buy, but not their habit.”

According to researchers at Stirling University, women in the study said they were more embarrassed about smoking from plain packs and felt more negative about smoking from the plain packs, even though they were smoking their regular cigarettes.

The same women allegedly reported smoking fewer cigarettes, stubbing out cigarettes early, smoking less around others and thinking more about quitting when using the plain packs.

Harbutt added, “This is perfectly normal behavior but it doesn’t last.”

E-cigarettes could turn kids into smokers, health department says

| April 25, 2013

The Philippine health department warned the public on April 12 against e-cigarettes, saying the tobacco substitute could turn children into smokers.

E-cigarettes have been gaining favor among Filipinos as higher tobacco taxes make smoking more expensive, according to a story in the Manila Times.

Food and Drug Administration director-general Kenneth Hartigan-Go disputed what he said were claims by vendors that e-cigarettes helped smokers kick the habit.

“Wittingly or unwittingly, the electronic cigarette promotes smoking among children and the youth. It makes them less fearful of hazards and risks of smoking,” he said in a health advisory posted on its website. “The public is advised not to smoke at all and not to use cigarettes, cigars, or e-cigarettes,” added Hartigan-Go.

Nearly one in five Filipinos smokes, according to the health department.

A law that came in effect this year will gradually raise the tax on cigarettes over five years, which would roughly double the price per pack to about PHP52 ($1.27) by 2017.

A basic e-cigarette kit in the Philippines costs as little as $24, featuring a battery-powered vaporiser that delivers a nicotine-laced mist.

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.

TTM wary of decreasing market share

| April 25, 2013

The Thailand Tobacco Monopoly (TTM) has gradually lost market share to imported cigarettes since the country lifted the tax barrier two decades ago, says director-general Torsak Chotimongkol.

Local cigarettes still claim 76 percent of the market, but foreign cigarettes are likely to gain one percentage point to 25 percent by the end of this year, according to a story in the Bangkok Post.

Torsak said TTM is trying to regain market share in the middle- to upper-income markets dominated by imported cigarettes, while also keeping its low-income base. “We need to protect our share from imports, as our margin is quite thin,” he said.

TTM cigarettes make up 33 percent of the market, legally imported cigarettes make up 12 percent, smuggled smokes contribute 10 percent and roll-your-own tobacco comprises 45 percent, said Torsak.

Roll-your-own tobacco has gained rapidly as a result of the tax waiver for local breeds of tobacco, while the tobacco produced by TTM is taxed at THB1,000 a kilogram.

Last year TTM had total sales of 36 billion units for THB70 billion, and this year will likely be similar.

“If TTM can expand overseas, our sales may reach THB100 billion, as we are now attempting to enter into Japan, the U.S. and Europe to build up our brand,” said Tanusak Lekuthai, deputy finance minister.