Tobacco Asia

14 tobaccoasia FRONT PAGE NEWS 卷首新闻 BAT's 1H 2023 Results British American Tobacco (BAT) announced an increase in half-yearly profit, boosted by higher cigarette prices and a quickly expanding market for tobacco substitutes. BAT has been investing in next generation products like heated tobacco and vapes to maintain growth while traditional smoking declines. The company benefited from cigarette price increases and the resumption of international travel, which helped duty-free sales. For the six months ending June 30, BAT's reported profit from operations increased 61.4% to £5.94 billion (US$7.66 billion). The company had recorded a £957 million impairment charge due to the transfer of its Russian subsidiary during the same period the previous year. Revenue for the first half increased 4.4% to £13.44 billion driven by its new categories products, for which revenue went up 26.6%. Revenue from non-combustible products now account for 16.6% of group revenue. New categories products contributed a £201 million increase to group profit. Combustible pricing is still strong, with good revenue performances in Africa and the Middle East (AME) and Asia-Pacific, Middle East, and Africa (APMEA) regions offsetting performance in the US, highlighting the value of the company's international reach. BAT's premium combustibles volume share in the US will perform better sequentially in 2023, with improved portfolio management driving early signs of stabilization. US$250 Million 1H 2023 Net Profit for Sampoerna Hanjaya Mandala Sampoerna (HMSP) reported a net profit of IDR3.75 trillion (US$249.9 million) in the first half of 2023, up 23% from the same period last year. The company's financial results showed that first-half net sales rose by 4.95% to IDR56.15 trillion from IDR 53.5 trillion year-on-year. Domestic sales totaled IDR55.3 trillion, while exports made up only IDR237 billion of total net sales. Sampoerna's total assets were at IDR48.55 trillion as of June 30, while its liabilities were IDR23.03 trillion. Cigarette stocks saw unexpected increases in the first quarter of the year as major producers raised their prices almost simultaneously while a new increase in the govern- ment's excise tax was not imposed until early March. The world's three largest cigarette companies, Sampoerna, Gudang Garam (GGRM), and Wismilak (WIIM), each reported a net profit margin of 8%, 6.5%, and 9.4% respectively during that quarter (compared to 7.3%, 3.6%, and 5.1% YoY). Between January and March, the prices of HMSP, GGRM, and WIIM shares increased by 33.9%, 44.4%, and 38.1%, respectively. 22nd Century at a Crossroads Several tobacco industry analysts say the window of opportu- nity for 22nd Century Group and its very-low nicotine cigarettes may be shutting before it even had a chance to fully open, reports the Winston-Salem Journal. This comes after the company announced its new interim c.e.o., John Miller, the fifth full-time of interim c.e.o. since July 2019 as well as a cost-cutting plan that it expects to reduce expenses by US$15 million annually, or around 26% of its US$58.3 million in operational expenses for the fiscal year 2022. The company's goal here is "to simplify operations as it continues to tighten its focus on key end markets and operat- ing strategies." In addition, 22nd Century recently completed a 1-to-15 reverse stock, which increased the share price of its stock from US$0.30 to US$4.50 to get back in conformity with Nasdaq's US$1.00 share price listing minimum. The company also had at least three private investor stock offerings with increasingly decreasing gross and net proceeds: US$40 million in June 2021; US$35 million in July 2022; and US$11.7 million on July 24. All of that contrasts with April 2021. Given an anticipated Food and Drug Administration rule requiring decreased nicotine cigarettes sometime in 2022, 22nd Century was at "peak hype" level, according to Clive Bates of Counterfactual, a public health and sustainability consultant located in London. The company's stock price rose to an all-time high of US$91.05 a share on April 30, 2021. However, according to Bates, this was "more of an indicator of market sentiment regarding the plausibility of the hype about VLN rule-making than about [22nd Century's] profitability or fundamentals. The stock has fallen by over 95% since, with growing skepticism that this long-promised [FDA rule on nicotine levels] will be delivered any time soon, if ever." Despite making tremendous progress in regulatory clear- ances and distribution activities, 22nd Century is having trouble connecting with tobacco customers. "The problem for 22nd Century is that few people will choose to buy its flagship VLN cigarette product more than once," Bates added. "I think we all understand that nicotine has always been the point of smoking. US Lawmakers Urge FDA: Reconsider Menthol Ban A prohibition on menthol cigarettes and flavored cigars will further exacerbate the already pervasive illegal trade in tobacco products, according to a letter sent to US Food and Drug Administration (FDA) commissioner Robert Califf by 20 US lawmakers. FDA expected to publish a final rule on these updated tobacco regulations in August, but the ban will not go into effect for at least a year after that. In their letter, the lawmakers said, "When Congress enacted the Tobacco Control Act in 2009, the intent was for FDA to use regulation to ensure proper oversight of the tobacco industry. When prohibition-based actions result in large illicit markets, it causes more risk for Americans, more crime, more burden on law enforcement and more opportuni- ties for policy and community conflict." "We urge FDA to take illicit markets seriously. FDA can do this by using regulation to safely meet adult consumer demand while also establishing controls on how those prod- ucts are marketed to protect kids. We urge you to reconsider FDA's proposed rules on menthol cigarettes and flavored cigars and refrain from any further prohibition-based actions that threaten to expand illicit markets." According to the letter, the proposed regulation aimed at banning menthol cigarettes would remove nearly one-third of all cigarettes currently marketed in the US from the authorized, regulated distribution system. The lawmakers are concerned that the ban may result in an illegal market similar to the one for vapor products, making it harder for law enforcement to control the growing illicit tobacco market.

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