As Expected, JT Volumes Down, But JTI Has Some Good News

Source from:  Tobacco Reporter 05/13/2011

Japan Tobacco Inc's cigarette sales during the 12 months to the end of March, at 134.6 billion, were 11.3 per cent lower than they were during the 12 months to the end of March 2010. Comparing the volume sales performance of the most recent year with that of the previous year is fraught, however, because of the effects of the huge tax hike and JT price increase that occurred on October 1 and because of the earthquake and tsunami that struck the country on March 11. JT reported that its share of the domestic cigarette market had fallen from 64.9 per cent to 64.1 per cent during the periods under review and that its share of the key brands' market had slipped from 45.1 per cent to 44.5 per cent. 'However,' it said, 'we are of the view that due to the fall off in sales following heightened demand ahead of the 1st October tax and price increase and the effect of the earthquake, these figures do not properly reflect our products' strong position in the marketplace.' It pointed out that in order to enhance brand equity of its key brands, new products were launched during the 12 months to the end of March and some packaging was redesigned. The domestic cigarette business' operating income during the 12 months to the end of March, at ¥212.9 billion, was up by 7.1 per cent on that of the previous 12 months. Net sales including tax were up by 2.0 per cent to ¥3,103.3 billion, adjusted net sales were up by 0.3 per cent to ¥617.9 billion, and EBITDA was up by 2.6 per cent to ¥257.6 billion. Japan Tobacco International's shipment volume during the 12 months to the end of December 2010, at 428.4 billion, was down by 1.5 per cent on that of the previous year, though JTI reported that shipments during the second half of 2010 had increased by 2.2 per cent. The company said that market share had continued to grow in most key markets including Turkey, Italy, France and Russia, due to brand, portfolio and trade marketing strengths. Shipments of JTI's global flagship brands during 2010, at 249.8 billion, were up by 2.7 per cent on those of 2009, an increase that was reportedly driven by Winston, LD, Mild Seven and Camel. JT's consolidated net sales including tax during the 12 months to the end of March, at ¥6,194.5 billion, were up by 1.0 per cent on those of the previous 12 months, while adjusted net sales excluding tax were down by 1.2 per cent to ¥1,956.6 billion. EBITDA was increased by 2.7 per cent to ¥541.1 billion, operating income was up by 10.9 per cent to ¥328.6 billion and net income was up by 4.7 per cent to ¥144.9 billion. "Within our domestic tobacco business, following the earthquake, we have developed a supply resumption schedule which is aimed at significantly expanding the number of products available for shipment by no later than August, 2011," said JT's president and CEO, Hiroshi Kimura, in announcing the consolidated results. "In addition to focusing on achieving a rapid recovery, our commitment to offer quality brands and services of high value that meet our consumer expectations remains unchanged. "Our international tobacco business continues to deliver a solid performance and act as a profit growth engine. The second half of 2010 showed signs of recovery with GFB growth and market share increase in most key markets. "We will continue to focus on innovation and top line growth, targeting an annual 10 per cent increase in EBITDA at constant rates of exchange." Meanwhile, reporting separately, JTI said that its shipments during the first three months of 2011, at 94.5 billion, were increased by 0.5 per cent, while GFB shipments, at 55.8 billion, were up by 2.1 per cent. Its core net sales, excluding taxes, were up by 4.4 per cent (6.5 per cent at constant rate of exchange) to US$2,447 million, and its core net sales per thousand cigarettes, excluding taxes, were up by 3.9 per cent (6.0 per cent at constant rate of exchange) to US$26.1. Enditem