Japan Tobacco Profits Fall

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

Japan Tobacco Profit Drops, Forecasts Growth on Gallaher Deal Japan Tobacco Inc.'s profits fell 15.2 percent in the latest quarter but the company also said Thursday that it expects growth from its acquisition of Britain's Gallaher Group. Profits for the three-month period ending in June fell to 64.6 billion yen ($540.1 million) from 76.2 billion yen a year earlier, according to the Tokyo-based company, whose brands include Winston, Camel, and Benson & Hedges. Sales fell 5.4 percent to 1.220 trillion yen ($10.20 billion). Japan Tobacco said international business was driving growth while sales and profits in Japan have been sliding as more people quit smoking. Japan Tobacco raised its forecasts for the full fiscal year through March 2008 to account for the addition of Gallaher, which was the largest Japanese takeover of a foreign company. Japan Tobacco now expects profits of 256 billion yen ($2.14 billion), up 21.9 percent from the previous year and surpassing its initial forecast of 186 billion yen ($1.56 billion). 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 addition of Gallaher to Japan Tobacco's lineup creates the world's third-largest tobacco empire, with annual output of about 600 billion cigarettes, according to Japan Tobacco. The $15 billion takeover is the biggest acquisition to date of a foreign company by a Japanese one, after Softbank Corp.'s purchase of the Japanese unit of 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. Enditem