Issue link: http://read.dmtmag.com/i/566084
tobaccoasia 71 CLOSING NEWS 卷尾新闻 world's second largest cigarette com- pany, beat expectations and reported strong results for its second quarter, helped by cost savings and market share gains. Company shares for the maker of Dunhill and Lucky Strike were up 2.8%. All large tobacco companies are grappling with falling sales in many markets due to increasing regulation, higher taxes, economic weakness and growing health consciousness. While cigarettes remain a highly profitable business, most of the large players now also sell e-cigarettes, which heat nico- tine-laced liquid into an inhalable vapor. Excluding the impact of currency moves, such as a weaker Russian rouble and Brazilian real and stronger British pound, revenue rose 2.4%, compared with a rise of 1.7% in Q1. Volume, however, fell 2.9%. "The underlying performance of the business remains strong and we are confident that we are on course to deliver an improved second half," said BAT chairman Richard Burrows. US RA Posts 2Q Profit Reynolds American, based in The Winston Salem, NC, recently reported strong second-quarter profit with cigarette prices and volume rising. The second-largest tobacco company in the country topped analysts' expectations, boosted its profits and dividends and announced a 2-for-1 stock split. Its net income skyrocketed to US$1.93 billion, or US$3.38 per share. Earnings, adjusted for non-recurring gains, came to US$1.02 per share, 8% better than Wall Street had expected, according to a poll by Zacks Investment Research. The parent company of Camel and Pall Mall cigarette maker R.J. Reynolds posted an 11.1% jump in revenue to US$2.4 billion in the period. It recently closed on a US$25 billion takeover of Newport seller Lorillard Inc. Cigarette sales volumes also rose 5.6% and the quarter included an impressive gain on a divestment that was part of the Lorillard deal. The company now expects full-year earnings in the range of US$1.90-2.00 per share, up from prior guidance of US$1.83-1.90. Reynolds is raising its dividend 7.5% to US$1.44 annually after the stock split. Shares of Reynolds American Inc. have increased 23% since the beginning of the year, while the Standard & Poor's 500 index has stayed nearly flat. The stock has climbed 39% in the last 12 months. Indonesia New Tax Hike in the Works President Joko Widodo's government is trying to decide whether to significantly raise tobacco taxes in 2016, something Indonesian authorities have done for years. Currently, tobacco taxes constitute about 10% of state revenue. The industry association representing Indonesia's vibrant cigarette industry – the world's fifth largest – says a big hike will bring further declines in sales and heavy job losses. It says small factories already laid off 10,000 workers in 2014. Tobacco taxes have been raised an average 11% annually since 2010. The country's president set ambitious tax collection targets for this year, including one of Rp 139 trillion (US$10.42 billion) for cigarette taxes, and if that's not met, the government's budget gap will widen. According to the Association of Indonesian Cigarette Producers, about 60% of men smoke, cigarette production increased at an annual 7% average between 2007 and 2013. Last year, it declined 0.5% and this year will see a 2% fall. The finance ministry announced its plans earlier this year for an additional 10% value-added tax on cigarette sales, but has yet to impose it and may scrap that proposal. The producers' association maintains that higher taxation in 2016 will make conditions much harder for factories. "The industry must be protected," spokesman Hasan Aoni Aziz said. "Smoking is often the indicator of the economy." Last year, Indonesia made 344 billion sticks, of which more than 90% were distinctive kretek cigarettes, containing cloves to spice up the taste. The big listed makers are HM Sampoerna, Gudang Garam, and Wismilak Inti Makmur. The number of cigarette factories has dropped to 600 from more than 3,000 only 5 years earlier. Canada Group Wants Ban Extended Ahead of provincial hearings into a bill banning the sale of menthol cigarettes in Quebec, an advocacy group wants the government to apply the proposed law on the aboriginal tobacco industry. But representatives from Kahn- awake's cigarette trade say the province has no jurisdiction in Mohawk territory, a sentiment echoed by the Mohawk Council of Kahnawake. Quebec Premier Philippe Couillard's Liberal government says it cannot impose regulations on a section of the industry that largely operates outside the law. Though First Nations have a constitutionally guaranteed right to grow tobacco on reserves, their tax-free sale to non-aboriginals is illegal (which is why aboriginal cigarettes are often referred to as contraband). In Kahnawake — the heart of Canada's billion-dollar aboriginal cigarette trade — the band council is set to impose regulations on the reserve's tobacco producers. Tobacco is Kahnawake's economic engine and by far the territory's largest employer — accounting for jobs in cigarette factories, storage, shipment, and wholesaling. But the council and industry insiders are quick to point out that their product meets the quality and safety standards set by Quebec.