Tag Archives: tobacco company
Coca-Cola is a perfect model of a wonderful business. Altria Group and Philip Morris International are two tobacco companies that have so many important features with Coca-Cola that long-term investors ought to hold all three in the same regard
Coca-Cola, Altria and Philip Morris International are leading companies in their respective markets. Coca-Cola has a leading 17% of its market.
Altria and Philip Morris International produce Marlboro, most popular cigarette brand, which has a biggest share of tobacco market. Marlboro enjoys a 42.6% share of the U.S. and international market.
Altria, that produces and distributes Marlboro within in the USA, has a 50% share of the U.S. cigarette market, 30% of the U.S. cigar market, and 50% of smokeless tobacco market.
Philip Morris International, that distributes Marlboro worldwide, was spun off from Altria in March 2008. Besides Marlboro, it owns 7 of the top 15 international cigarette brands that includes Philip Morris, L&M and Bond Street. Philip Morris International’s cigarettes brands have a 29% share of the world cigarette market, excluding China and the U.S.
Leading market share provide Altria, and Philip Morris International significant advantages. Smokers are literally addicted to cigarettes and show their favorite brand loyalty.
Besides pricing power, Philip Morris International and Altria, and have significant economies of scale in manufacturing and distribution. Each of these tobacco companies has fixed costs across a number of tobacco products sold in comparison with its competitors, which helps then to get higher operating profits.
The largest tobacco company Bulgartabac Holding has reported its consolidated earnings that grew 8.5 times in the first half of 2012 compared to the same period of 2011.
In such a way, in the first half of 2012, the cigarette maker, which was sold to a subsidiary of the Russian bank VTB for EUR 100.1 M by the Bulgarian government in September 2011, reported a total income of BGN 27 M.
The Bulgartabac Holding will keep BGN 23.5 M from the income, but the rest will be directed to minority shareholders in the group’s 3 subsidiaries – Sofia BT, Blagoevgrad BT and Pleven BT.
Bulgartabac registered an income of BGN 13.3 M in the second quarter of 2012 exceeding its result of BGN 10.2 M from the first quarter
In the first half of 2012, total sales of the tobacco company increased by 46 percent year-on-year to BGN 244 M; the growth in the second quarter was 53 percent year-on-year, to BGN 114 M.
A total of 82 percent of tobacco company’s produce goes to exports, the BT Holding declared in its media statement; along with cigarettes, BT Holding as well deals with exports of tobacco leaves and oriental tobacco, which comprise nearly 2 percent of its sales.
Bulgartabac Holding has kept its major market share in Bulgaria, with 33.8 percent of the Bulgarian market of cigarettes.
BT Invest, which is the property of Russian bank VTB, obtained a tender at the end of August 2011 to purchase a 79.8 percent stake in Bulgartabac for EUR 100.1 M.
According to the contract, it is prohibited to resale the holding in the next 10 years. This condition can be dropped if it is a change in the ownership of BT Invest. This possibility has been approved by the Bulgarian Privatization Agency.
BT Invest, that is registered in Austria and owned by the Russia’s second-biggest bank VTB, was the only buyer for the Bulgarian tobacco monopoly after British American Tobacco and CB Family Office Service refused the sale.
The Bulgartabac Holding’s less profitable plants, which are situated in the cities of Plovdiv and Stara Zagora, were purchased for BGN 31 M and BGN 18 M respectively in 2009.
Now Bulgartabac is the owner of the two larger and more consolidated plants in Sofia and Blagoevgrad, a processing plant in Yasen near Pleven, and a number of commercial brands.
Japan Tobacco Inc., the world’s third-largest maker of tobacco products by volume, has created a backup program to defend global cigarette supplies if production is harmed by a natural calamity, JT President and Chief Executive Officer Mitsuomi Koizumi said.
During a recent interview Koizumi said that the company has organized a global project team and ended analyzing all measures. The tobacco giant is permanently updating its plan.
Japan Tobacco was obliged to stop cigarette shipments after the earthquake and tsunami on the March 2011, but Koizumi said that the company’s program suggests the covering of more than just domestic production.
“Taking account of natural calamities, the company does not know what is going to happen in any country,” Koizumi said, making reference to the massive flooding in Thailand in 2011.
The program sets which of the company’s 6 domestic and 22 overseas tobacco plants will answer for backups if some plant is affected by a natural calamities, and demonstrates how it will diversify its materials supply, Koizumi said.
To extend overseas sales under the conditions of decreasing domestic demand, a global tobacco company, that owns well known tobacco brands: Winston, Camel, Sobranie, made a change in its main cigarette brand. The company decided to change the name of Mild Seven to Mevius.
The brand name change is deemed to increase sales in some parts of Europe where the word “mild” is considered as mutilating the health dangers of smoking.
To reinforce its line of lower-priced products in the context of the global economic crisis, the tobacco giant has purchased Belgian tobacco maker Gryson NV, famous for its cut tobacco by people who are interested in roll-your-own cigarettes.
Koizumi said that it is very important to improve cigarette brand portfolio for marketing to sell tobacco products under the economic conditions and added that emerging markets can provide a “room for growth» for a premium brand for the long term, given their economic expansion.
The world’s most international tobacco company, British American Tobacco, declares that plain tobacco packaging would not have effects in decreasing smoking rates as tobacco packaging does not represent an essential element in people’s decision to smoke or stop smoking.
This is one of the major arguments brought up by the tobacco group in a 132 page submission to the UK’s Department of Health.
The submission was created in reply to the UK government’s public consultation on plain packaging that started on April 16 and closed on August 10.
– The Department of Health has not examined the relevant study and reckons upon scanty and doubtful prove that fails to make the key link between packaging and any lessening in smoking.
– It would reinforce an already serious illicit trade trouble in the UK.
– It would have other important negative unintentional effects such as falling prices and thus increasing smoking, decreasing government income, and damaging small business.
– Plain Packaging is illegal as it would not only break some UK, EU and international laws and agreements, but would be a reason for a wholesale expropriation of BAT’s significant intellectual property, demanding payment by the government of very serious compensation.
– Taking into account the admitted risks, the Department of Health has not shown that the advantages would outweigh the negative effects of plain packaging.
– There are several alternative evidence-based variants that are corresponding, efficient, workable and can reach public health purposes.
Phil Morse, BAT’s UK & Ireland general manager, said on the company’s website that as the company specified their submission, they make an objection to plain packaging for many credible reasons. ‘Indeed, the company considers that the arguments against plain packaging are innumerable. Especially, BAT considers that the Department of Health’s research into the potential advantages of plain packaging reckons upon poor and questionable prove that fails to show the key link between packaging and any lessening in smoking.
Phil Morse added that the tobacco company accepts this consultation and the government’s stated obligation to a transparent debate and consultation process. The group hopes that the government’s commitment to supporting impartiality is shown over the coming weeks and months.
‘As a tobacco industry that employs thousands of people in the UK and increases billions in taxes for the treasury, the company is asking for is a just, open, evidence-based debate concerning an important question that could have terrible unintentional consequences.’
Japan Tobacco Inc., Asia’s largest tobacco company by market value, declared first-quarter profit increased 83 % as it regained some of the market share that was lost after the earthquake in 2011.
Net profit increased to 84.5 billion yen ($1.1 billion) from 46.1 billion yen in a previous year, the tobacco company declared in a statement yesterday.
The manufacturer and seller of Global Flagship Brands like Winston and Camel cigarettes deals with overseas trade and has launched new tobacco products as a domestic market does not produce high profit. The company’s share in the domestic tobacco market regained to nearly 59 % as of June, according to the company. Japan Tobacco’s market share had declined to 55 % in the year ended March 2012 from 64 % a year earlier after the March 11, 2011, earthquake hurt tobacco sales.
President Mitsuomi Koizumi said in a statement that tobacco business in Japan withstood the consequences of last year’s earthquake with steady market share recovery following a number of sales and marketing initiatives.
Tobacco sales increased 17 % to 512 billion yen from 437 billion yen in a previous year. The company left its prediction for the fiscal year ended March 31 unchanged at 318 billion yen.
In May JTI expressed a wish to buy Belgium-based Gryson NV for 475 million euros, or $597 million at the time, in order to expand in Europe’s roll-your-own cigarette market. Sales volumes are decreasing in Japan’s tobacco industry because of tax hikes and increased health consciousness.
A law passed in 2011 permitted the Japanese government, which is the cigarette maker’s biggest shareholder, to sell one-third of its entire holding in order to help pay for earthquake rebuilding. The government is the owner of 50 % of Japan Tobacco, in accordance with data compiled by Bloomberg.
Japan Tobacco intends to buy back as much as 250 billion yen of its shares if the government sells its shares, the tobacco company has said.
Japan Tobacco shares closed up 1.3 % to 2,445 yen ahead of the earnings announcement. The stock is up 35 % for the year in comparison with a 0.43 % gain for the broader Topix index.
Imperial Tobacco, the UK’s largest cigarette manufacturer, informed about the opening of a state of the art airside smoking zone. The smoking area will be situated at Birmingham Airport.
According to Imperial Tobacco, smoking people who use services of Birmingham Airport can now enjoy smoking of their tobacco products freely. Neither wind nor rain in a dedicated area can disturb smoking process. The smoking area is situated near the airport’s new departure lounge bar. Smoking area is purpose-built premise and has unique equipment. There are lighting, shelter, hand gel and litter solutions in the smoking zone. In order to keep comfortable place and ensure travelers about their flights, smoking area provides a departures board.
Imperial Tobacco’s ‘Smoking Allowed’ initiative, a high-profile program that is oriented to maintain adult smokers in the UK, was used for the development of the new smoking area.
General Manager at Imperial Tobacco, Amal Pramanik, said that the tobacco company assumed commitment to maintain those 12 million UK smoking adults. Pramanik added that they take into account the opinions and preferences of smoking consumers across the country to know the levels of support they demand.
Pramanik continued that in November 2011 the tobacco company launched ‘Smoking Allowed’, a campaign that suggests projects and activities to maintain smoking people when they are travelling, working and have their leisure time.
Over the past few months the UK’s cigarette manufacturer have been dealing with organizations across the country to ameliorate smoking zone equipment for adult smoking consumers and the new smoking zone at Birmingham Airport is the company’s latest success story.
According to the data, about 9 million passengers use services of Birmingham Airport each year and the Imperial Tobacco have cooperated with the Airport on its terminal extension plans to be sure that they could provide the Airside Smoking Balcony for adult smokers.
In accordance with the tobacco company, travelers are in raptures over the smoking area and the it is a amazing addition to their ‘Smoking Allowed’ programme. The programme is really achieving success and the tobacco company is going to deal with a number of high profile locations across the UK as they continue to provide high-class support for UK adult smokers.
Richard Gill, Birmingham Airport’s Head of Commercial, said that Imperial Tobacco provides quality equipment for all Birmingham Airport’s passengers. Gill added that they are glad to be able to open such area for those who chose to smoke in reply to survey the airport conducted to reveal what facilities their customers would like to see at Birmingham Airport.
Last year British American Tobacco Holdings (New Zealand) paid $801.2 million in excise duty. That is as much as the government took out from all 16 enterprises owned but the state, according to the company’s data.
Income increased 4.1 per cent to $120.7 million a year earlier, in accordance with financial data of the company based in Auckland and allocated there with the Companies Office.
The tobacco company’s sales declined to $1.06 billion from $1.08 billion last year, meaning three quarters of its income were taken out by the government. It as well paid $32.9 million in company duty.
The cost of sales jumped to $864.3 million from $850.1 million. British American Tobacco gave $49.9 million to buy finished products from related parties and made its inventory to $338.2 million as at December 31, from $220.1 million in 2011.
In March, British American Tobacco concluded a bargain with the Inland Revenue Department over historic tax avoidance, according to which the company used transboundary structured finance transactions that used creepholes in the international tax law of New Zealand.
The tobacco distributer accepted to pay $15.6 million in tax and interest of $6.3 million, having beforehand provided in its accounts for almost $40 million.
Excise on tobacco is established to increase a yearly 10 per cent for the next 4 years after Finance Minister Bill English aimed smokers in the budget to make a bigger contribution to returning to excess in 2015.
Due to the fact that tobacco is an addictive product, the increases have been marked an active way of raising earnings for the government by the Treasury, and the latest round of hikes will increase the treasury by $1.4 billion over the four years.
BAT was already disputing with three years of 10 per cent yearly increases as part of the government’s measure for a smoke-free nation by 2025.
The company gave a dividend of $162.9 million back to its parent, the biggest repayment to the shareholder since Rothmans International was acquired by British American Tobacco in 1999. It did not pay a dividend in 2010.
Philip Morris International’s profit of $1.27 per share in the first quarter of fiscal 2012 raised from the year-ago profit of $1.06 per share. The good results were made due to auspicious pricing and volume mix along with strong performance in Asia, Middle East & Africa, Eastern Europe and the European region.
PMI recently informed about a new share reacquisition program of $18.0 billion. This new plan is planned to commence soon after the end of the current $12 billion share buyback program, which started in May 2010. The company has a target of repurchase shares worth $6.0 billion during 2012. It is paying its quarterly dividend statedly.
The company has strong cigarette brand portfolio. It consists of popular brand names like Marlboro, L&M, Bond Street and Parliament. Philip Morris is improving its brand portfolio by means of innovations that are found on improved consumer understanding.
The L&M cigarette brand is being restored by the development of smoother taste products and more alluring packaging designs. Moreover, the portfolio of premium and expensive brands (Parliament, Virginia Slims and Chesterfield) along with the cheap brands (Bond Street, Red & White, and Next) are being developed and replenished.
Besides, the tobacco company is listed in a wide range of markets that provide it with growth opportunity despite macro-economic headwinds. It has a large share in the emerging markets. Asia is still a growth engine for the company with strong growth in Indonesia, China, Philippines and Korea.
But, governments around the world are putting limitations on cigarette manufacturers to prevent the appearance of new tobacco consumers. The US Food and Drug Administration (FDA) has admitted a regulation that will oblige cigarette makers to place strict warning labels on cigarette packets to discourage customers from smoking.
Governmental measures that ban the use of tobacco products, together with the lessening social acceptance of smoking, will negatively influence on the company’s volume in many markets.
Besides, several retail dealers and importers have appeared who are engaged in fake versions of the company’s top-branded cigarettes. Miami is one of the top three zones counterfeit cigarettes. These cigarettes are not only fake, but also far more injurious to health than their real counterparts.
As per the lab data of “The Organized Crime and Corruption Reporting Project,” fake cigarettes from China likely to consist of 80% more nicotine and 130% more carbon monoxide, and impurities that are harmful for health. This kind of trafficking has a negative influence on the company’s reputation and earnings.
Hongta Tobacco Group, China’s Tobacco manufacturer, expressed its intention to expand into the Russian market, sources close to the matter affirmed Monday.
Analysts said that such a move is a big risk.
The Russian business daily Kommersant, quoting Savvidi Lvan Lgnatievich, the President of Donskoy Tabak, reported that The Hongta, based in Yunnan, may use manufacturing capability of the Russian tobacco company Donskoy Tabak in a primary connection with the final aim of getting the South Russia-based company.
It is said in the report that tobacco company Donskoy Tabak would manufacture nearly 2 billion Hongta-branded cigarettes each year for the local market at the setting period, and then increase the production to 10 billion cigarettes by using Donskoy’s spare capacity.
The tobacco company, owned by Chinese State, could get a 0.5 % share of the Russian tobacco market according to the agreement, which is likely to be accomplished by early July.
A management staff at Hongta, who wanted to be unnamed, affirmed the report when reached by the Global Times Monday, but denied any comments and information providing.
In accordance with Hongta, last month Lgnatievich, being in Hongta, discussed with Hongta President Liu Wandong future cooperation projects in Russia.
Wang Nengyuan, a tobacco industry analyst and partner at the Adfaith Management Consulting, said to the Global Times Monday that, Hongta’s overseas recognition is low in comparison with other international tobacco brands, and there is no evidence if the Chinese company can make a successful business in Russia.
Wang Nengyuan said that if Chinese companies want to be globally recognized, they should adapt to the overseas market and manage sales networks.
Huang Xiaoyun, a tobacco industry analyst, was concordant with Wang’s opinion, stating that Chinese companies are not well-informed about the overseas markets and regulations, which could expose future development of the companies to risks.
In accordance with the China International Council for the Promotion of Multinational Corporations, China experienced a pure loss of $26.8 billion in overseas investments in 2011.
Huang said that they have not to be afraid of risks, considering the uncertain external environment, foreign partners are likely to reduce acquisition requirements to facilitate their financial pressures.
In November last year, Ria Novosti, Russian State news agency, told that Donskoy Tabak would be ready for sale because the tobacco company suffered from high taxes and new anti-smoking law in the country.
Corporate Commercial Bank, a Bulgarian bank, has vended its 8% stake in Bulgartabac Holding, a largest cigarette producer in Bulgaria.
Corporate Commercial Bank has vended a whole of 605 177 Bulgartabac shares, or 8.21% of the holding’s capital, thereby technically exiting the tobacco company.
The bank said that the bargain was resolved with two transactions recorded by Bulgaria’s Central Depository on May 23 and May 28.
In one of the disputable Bulgarian privatization bargains, in September 2011 the Bulgarian government vended Bulgartabac Holding to an affiliate of the Russian bank VTB for EUR 100.1 M. A margin of profit of the company at the end of 2011 was BGN 31.3 M.
Not only Corporate Commercial Banks, but also 14 bidders demonstrated interest in the buying of the Bulgaria-owned share of 80% of Bulgartabac almost a year ago.
In he course of a Parliament hearing in September, the Bulgarian Privatization Agency head Emil Karanikolov contradicted few media versions and affirmations made by politicians that the purchaser did not related to Bulgaria’s Corporate Commercial Bank, considered to fund the media group of mogul Irena Krasteva, and/or alcohol manufacturer Vinprom Peshtera, which in return are considered to be connected to DPS, the ethnic Turkish party (Movement for Rights and Freedoms).
BT Invest, which is a property of Russia’s second-largest bank VTB, won at the close of August a bid to purchase a 79.8% stake in Bulgartabac for EUR 100.1 M.
The contract prohibits the resale of the holding in the following 10 years, a condition which can be skipped through a change in the BT Invest ownership. The Bulgarian Privatization Agency allowed this probability.
Austria-registered BT Invest was the only bidder for the Bulgartabac Holding since British American Tobacco Company and Austria-based CB Family Office Service refused the deal.
Two of the less lucrative factories of Bulgartabac holding located in Plovdiv and Stara Zagora were vended in 2009 through the Sofia Stock Exchange for BGN 31 M and BGN 18 M correspondingly.
At present Bulgartabac is the owner of two larger and more firmly established factories in Sofia and Blagoevgrad, a processing plant in Yasen near Pleven, and also few commercial brands.