Essentra Bets on New-Look Filters as Cigarette Makers Try to Stand Out

Source from:  The Wall Street Journal  02/21/2014

Essentra PLC (ESNT.LN), a distributor of plastic components and packaging products, is hoping to profit from developing distinctive kinds of cigarette filters as tobacco companies banned from advertising their wares look for ways to make their products stand out.

"They can't advertise, they're under threat of legislation all round, so the filter is the differentiation point of a cigarette," chief executive Colin Day said Thursday in an interview with Dow Jones Newswires. "Flavor, shape, style [of filter]--that's the key differentiator and tobacco companies know that only too well," added Mr. Day, a former director of Imperial Tobacco PLC (IMT.LN).

Essentra's website claims that one such product--a cogwheel-shaped filter branded as "Groove Core"--offers advantages for tobacco companies beyond its novel appearance, for instance by being hard for counterfeiters to copy.

A recent agreement to supply "an innovative combined filter in European markets" was the Essentra's biggest-ever sale, according to its 2013 results published earlier Thursday. Mr. Day said the company is close to striking more big deals.

Last year Essentra changed its name from Filtrona to make a break from its former life as the cigarette filter-making unit of Bunzl PLC (BNZL.LN), a bigger distribution group.

Filters accounted for 269 million pounds ($449.5 million) of group revenue of GBP798.1 million in 2013, a 15.5% increase over 2012. The unit accounted for a slightly smaller proportion of overall revenue, however--34% compared with 35% in 2012. Pretax profit was up 15% on the year at GBP86.4 million.

At 1222 GMT, shares down 5% at 845 pence, valuing the company at GBP2.1 billion. Enditem