Japan Tobacco Drops on Speculation of Weaker Sales

Source from:  Bloomberg 10/08/2010

Japan Tobacco Inc., the world's third-largest publicly traded cigarette maker, fell the most in two months in Tokyo trading on speculation the industry's sales growth last month may have been weaker than forecast. Japan Tobacco slid 3 percent, the most since July 30, to close at 262,500 yen. It was the biggest drag on Japan's Topix index, which advanced 1.2 percent. Tobacco sales growth in Japan last month may be lower than Credit Suisse Group AG predicted, analyst Yoshiyasu Okihira said in a note to clients yesterday. Credit Suisse earlier forecast cigarette sales in the country would increase 85 percent as smokers hoarded cigarettes before a record 40 percent tax increase at the start of this month. Major convenience stores boosted cigarette sales by between 60 percent and 70 percent in September, said Okihira, who has a "neutral" rating on Japan Tobacco. The outlets handle more than 60 percent of Japan's cigarette sales, he said. Today's retreat extended Japan Tobacco's slide this year to 16 percent, compared with an 8.3 percent decline for the Topix. "Some people are selling Japan Tobacco, as they worry that the domestic cigarette market will shrink faster than expected," said Tsuyoshi Segawa, a Tokyo-based strategist at Mizuho Securities Co. The price of a pack of 20 cigarettes in Japan rose by an average of 33 percent to 400 yen ($4.79) on Oct. 1 because of the higher tax. Thousands of smokers bought cigarette cartons at convenience stores and other retailers before the tax took effect. Japan Tobacco forecast net income to fall 3.9 percent this fiscal year as the higher tax may cut demand. The Tokyo-based company expects its domestic cigarette sales to fall 16 percent this fiscal year, it said in April. Enditem