Tobacco Asia

18 tobaccoasia FRONT PAGE NEWS 卷首新闻 Financial Times reported that Rajiv Jain, founder of US$92 billion US-based investment firm GQG Partners, said he had urged BAT management to call time on a London listing that dates back to 1912. Saying BAT is an "orphan in Europe," Jain added, "The core ownership base [of BAT] has disappeared. It makes no sense for them to remain there." "What's the point of remaining listed in London?" he questioned, referencing the FTSE 100 company's US-centric business model and the valuation difference between it and its US-listed competitor Philip Morris International, where GQG is a top-10 shareholder. On a constant currency basis, the US contributed for approximately 40% of BAT's £27.6 billion in global revenues last year, making it the cigarette manufacturer's largest market. BAT's US subsidiary Reynolds is the owner of the well-known Newport and Camel cigarette brands, while BAT's Vuse vape has a 41% market share in the e-cigarette category, according to Nielsen data. KT&G Shareholders Beat Down Activist Funds Demands Activist fund investors' demands were successfully resisted by Korea Tobacco & Ginseng Corporation (KT&G) management at its annual shareholders' meeting as all the activist funds' proposals were rejected by the company's shareholders with the exception of their agenda item calling for quarterly dividends. According to The Korea Times, the leadership of current c.e.o. Baek Bok-in is anticipated to be strengthened because all of the suggestions for board members made by the activist fund investors Flashlight Capital Partners (FCP) and Anda Asset Management (AAM) were also rejected. The board's proposed dividend payout of KRW*5,000 per share received 68.1% of the vote from shareholders, approving management's initial strategy. Shareholders voted 32.2% in favor of FCP's proposal for a KRW10,000 dividend per share, while only 1.5% supported AAM's KRW7,867 plan. The two activist funds' argument that the biggest cigarette firm in Korea should raise its dividend payments to a level comparable to that of its global competitors was unsuccessful in getting enough share- holder proxy votes. The activist funds' other demands, which included stock retirement and repurchases totaling KRW1.2 trillion and an increase in the number of independent directors from six to eight, were also rejected. FCP's suggestion to start quarterly payouts was the lone exception, with 82.2% of shareholders voting in favor for it. The activist funds were convinced they would prevail at the shareholders meeting given that 63% of KT&G sharehold- ers are either retail investors or overseas investors. But it turned out that shareholders valued the company's steady growth more than larger dividend payments. Taiwan's Amended Tobacco Bill Kicks In Taiwan's Tobacco Hazards Prevention Act Amendment Bill that includes new rules like the complete ban on e-cigarettes and raising the smoking age from 18 to 20 is now in effect. The Cabinet introduced the amendment bill in January of last year, and the legislature approved it in February of that same year. The amended bill was signed into law by President Tsai Ing-wen on February 15 this year but came into effect on March 22. Under the new rules, the manufacture, import, sale, supply, exhibition, advertisement, and use of e-cigarettes are completely banned. Manufacturing or importing e-cigarettes is punishable by a fine up to TW$**50 million. Unapproved new tobacco products, including heated tobacco products, will need to be submitted to the appropriate authorities for health risk assessments before they may be manufactured, imported, or sold. Even when approved, the products cannot be sold via online platforms or vending machines where customers' ages cannot be verified. Also, no free tobacco products shall be distributed at any commercial premises, and no one can provide tobacco products to anyone under the age of 20. The required portion of the health hazard warning on a tobacco product package now increased from 35% to 50%. Tobacco products cannot contain additives that are prohibited or not approved by the central government's agencies. College campuses, kindergartens, daycare facilities, and family childcare homes are now included in the list of places where smoking is prohibited. Although bars and nightclubs are categorized as no-smoking establishments, they are allowed to set up smoking rooms that have their own air conditioning. Imperial Brands On Track to Meet Full-Year Expectations In a brief statement to the stock market, Imperial Brands stated that it was "on track to meet full-year expectations" through increases in profit and revenue, but cautioned that sales of its next-generation products (NGP) fell in the first half of the year in the US. The company expects revenue and operating profit to grow this year, despite remaining flat in the first half. The drop in its NGP US sales was due to "uncertainty" which came after the US Food and Drug Administration (FDA) issued a market- ing denial order for several of Imperial's myblu vaping products last year. Nevertheless, Imperial expects NGP revenue to be ahead of the prior period, driven by strong growth in Europe which more than offsets the declines in the US market. The company accelerated product and market launches across all NGP categories, including the roll out of its heated tobacco products, Pulze and iD, in seven European markets. It also introduced its blu 2.0 vape product in the UK, Spain, France, Czech Republic, and Portugal. Imperial was able to increase its market share for cigarettes and other combustible products in the US, Spain, and Australia, three of its key markets, offsetting declines in the UK and Germany. Imperial's market share has remained stable for two years running after several years of decline. "Focused investment in our priority combustible markets continues to support the stabilization of market share," the company said. "We are consolidating the strong gains achieved last year with aggregate share in our top-five markets at the half year expected to be at a similar level to the prior period." *US$1.00 = KRW1,326.00 **US$1.00 = TW$30.80

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