BAT to Shed Jobs at Pécs Plant

Source from:  Budapest Business Journal (hu) by Péter Oláh 09/09/2004

British American Tobacco Hungary Kft, Hungary's largest local tobacco company by revenues, last Friday announced it will eliminate 90 production-related jobs at its plant in Pécs, southwest Hungary. The company said the decision is aimed at preserving its competitiveness, amid rising excise duties on tobacco products and a boom in black market tobacco sales. "The hike in the excise and tax burdens of legally operating market players, and the drastic shrinking of the legal tobacco market, lead to a major rearrangement of the market," the company's press release said. "The [government's] excise policy, which disregarded the purchasing power of local customers, led to a boom in black market sales and a 63% increase in retail prices in the last one and a half years. The management of BAT Hungary decided to continue production in Hungary and to improve the company's competitiveness," the release continued. BAT's announcement came two months after rival tobacco firm Philip Morris Hungary Kft announced the closure of its factory in Eger, northeast Hungary, and four months after Dutch tobacco firm Reemtsma Hungary Rt shut down its Debrecen plant in May. Currently, a total of 301 people work in the fields of production and production-related logistics at BAT Hungary's Pécs factory. Slightly less than one-third of these jobs will be eliminated from the end of this month. Pauline Stam, general manager of BAT, said in an interview in May that excise duties were hiked by 94.5% between 2002 and 2004. According to Stam, duty non-paid products, as well as counterfeits, are expected to decrease total legal domestic sales by 15% this year. This compares to a 1%–1.5% decrease in previous years. At that time, she also noted that the "declining market puts a lot of pressure on [tobacco] companies." In 2003, BAT posted net revenue of Ft 43 billion (€173 million). This year, it expects that its revenues will decline by less than the average decline in legal tobacco sales in Hungary. At the end of June, retail audit figures showed that BAT had a 46% share of the local tobacco market. BAT, which is a subsidiary of the world's second biggest cigarette manufacturer, British American Tobacco Plc, invested about Ft 100 billion into the Pécs factory in recent years, in order to increase efficiency in the fields of production, logistics and distribution. Enditem