Japan Tobacco's Quarterly Profit Drops

Source from:  Thursday August 9, By Yuri Kageyama, AP Business Writer 08/10/2007

Japan Tobacco's Quarterly Profit Drops; Company Forecasts Growth on Gallaher Deal Japan Tobacco Inc. said Thursday its April-June profit dipped 15.2 percent from a year ago, but it forecast annual growth from the acquisition of Britain's Gallaher Group, Japan's biggest takeover of a foreign company. Quarterly profit at Japan Tobacco slipped to 64.6 billion yen ($540.1 million) from 76.2 billion yen the same period last year, according to the Tokyo-based company with Winston, Camel, and Benson & Hedges as global brands. Sales for the three months ended June 30 fell 5.4 percent to 1.220 trillion yen ($10.20 billion) from 1.290 trillion yen a year earlier. Japan Tobacco said international business was driving growth while sales and profit in Japan have been sliding as more people quit smoking. Japan Tobacco revised upward its full year forecasts through March 2008 to account for the addition of Gallaher. It projects a 256 billion yen ($2.14 billion) profit, up 21.9 percent from the previous year, and surpassing its initial forecast of annual profit of 186 billion yen ($1.56). Its sales projection for the year was raised to 6.410 trillion yen ($53.60 billion), up 34 percent from the previous year, and above the earlier expectation of 4.890 trillion yen ($40.89 billion) in sales. The integration of Gallaher will create new opportunities while savings costs by more than $300 million by the end of 2010 through headquarters integration and procurement and sales efficiencies, the company said. "Over the last 100 days, we have successfully formulated an integration plan for the Gallaher business which will create synergies for future business growth and position us for even greater expansion as a leading company in the global tobacco industry," Chief Executive Hiroshi Kimura said in a statement. The addition of Gallaher to Japan Tobacco's lineup creates the world's third biggest tobacco empire, with annual output of about 600 billion cigarettes, according to Japan Tobacco. The $15 billion takeover is the biggest acquisition of a foreign company by a Japanese one. The deal exceeds mobile and Internet service company Softbank Corp.'s purchase of the Japan unit of British telecom Vodafone Group PLC for 1.75 trillion yen ($14.63 billion) last year. Japan Tobacco has been expanding overseas, seeing sales growth in Russia, Spain and Iran. Recent efforts to promote the Mild Seven brand in Japan were also producing results, the company said. Japan Tobacco has also been branching into other businesses, such as pharmaceuticals and food businesses, which recorded declining profits. The beverage business, which is part of its food operations, showed sales growth through vending machine sales, and frozen foods also did well, it said. Japan Tobacco shares edged down 4.4 percent to 610,000 yen ($5,126). Enditem